Intrinsic value of VIVUS - VVUS

Previous Close

$0.86

  Intrinsic Value

$0.04

stock screener

  Rating & Target

str. sell

-95%

  Value-price divergence*

0%

Previous close

$0.86

 
Intrinsic value

$0.04

 
Up/down potential

-95%

 
Rating

str. sell

 
Value-price divergence*

0%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of VVUS stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  30.53
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  124
  126
  129
  133
  136
  141
  145
  150
  155
  161
  167
  174
  181
  189
  197
  205
  214
  224
  234
  244
  255
  267
  280
  293
  307
  321
  337
  353
  370
  388
  407
Variable operating expenses, $m
 
  208
  213
  218
  224
  231
  239
  247
  256
  265
  275
  286
  298
  310
  323
  337
  352
  368
  384
  402
  420
  440
  460
  482
  505
  529
  554
  581
  609
  638
  669
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  69
  208
  213
  218
  224
  231
  239
  247
  256
  265
  275
  286
  298
  310
  323
  337
  352
  368
  384
  402
  420
  440
  460
  482
  505
  529
  554
  581
  609
  638
  669
Operating income, $m
  56
  -82
  -83
  -86
  -88
  -91
  -94
  -97
  -100
  -104
  -108
  -112
  -117
  -122
  -127
  -132
  -138
  -144
  -151
  -158
  -165
  -172
  -180
  -189
  -198
  -207
  -217
  -228
  -239
  -250
  -262
EBITDA, $m
  57
  -81
  -83
  -85
  -88
  -90
  -93
  -97
  -100
  -104
  -108
  -112
  -116
  -121
  -126
  -132
  -138
  -144
  -150
  -157
  -164
  -172
  -180
  -188
  -197
  -207
  -217
  -227
  -238
  -250
  -262
Interest expense (income), $m
  15
  15
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  3
Earnings before tax, $m
  23
  -96
  -83
  -85
  -87
  -90
  -93
  -96
  -100
  -104
  -108
  -112
  -117
  -122
  -127
  -133
  -138
  -145
  -151
  -158
  -166
  -174
  -182
  -191
  -200
  -209
  -220
  -230
  -242
  -253
  -266
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  23
  -96
  -83
  -85
  -87
  -90
  -93
  -96
  -100
  -104
  -108
  -112
  -117
  -122
  -127
  -133
  -138
  -145
  -151
  -158
  -166
  -174
  -182
  -191
  -200
  -209
  -220
  -230
  -242
  -253
  -266

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  270
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  306
  37
  38
  39
  40
  41
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  98
  102
  107
  113
  118
Adjusted assets (=assets-cash), $m
  36
  37
  38
  39
  40
  41
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  98
  102
  107
  113
  118
Revenue / Adjusted assets
  3.444
  3.405
  3.395
  3.410
  3.400
  3.439
  3.452
  3.409
  3.444
  3.426
  3.408
  3.412
  3.415
  3.436
  3.456
  3.417
  3.452
  3.446
  3.441
  3.437
  3.446
  3.423
  3.457
  3.447
  3.449
  3.452
  3.439
  3.461
  3.458
  3.434
  3.449
Average production assets, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
Working capital, $m
  255
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
Total debt, $m
  241
  -14
  -13
  -12
  -11
  -10
  -9
  -8
  -6
  -5
  -3
  -2
  0
  2
  4
  7
  9
  11
  14
  17
  20
  23
  26
  30
  33
  37
  41
  45
  50
  54
  59
Total liabilities, $m
  288
  33
  34
  35
  36
  37
  38
  39
  41
  42
  44
  45
  47
  49
  51
  54
  56
  58
  61
  64
  67
  70
  73
  77
  80
  84
  88
  92
  97
  101
  106
Total equity, $m
  18
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
Total liabilities and equity, $m
  306
  37
  38
  39
  40
  41
  42
  43
  46
  47
  49
  50
  52
  54
  57
  60
  62
  64
  68
  71
  74
  78
  81
  86
  89
  93
  98
  102
  108
  112
  118
Debt-to-equity ratio
  13.389
  -3.800
  -3.510
  -3.200
  -2.860
  -2.510
  -2.150
  -1.790
  -1.420
  -1.040
  -0.670
  -0.300
  0.060
  0.420
  0.760
  1.110
  1.440
  1.760
  2.070
  2.370
  2.660
  2.940
  3.210
  3.470
  3.720
  3.960
  4.190
  4.410
  4.630
  4.830
  5.020
Adjusted equity ratio
  -7.000
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  23
  -96
  -83
  -85
  -87
  -90
  -93
  -96
  -100
  -104
  -108
  -112
  -117
  -122
  -127
  -133
  -138
  -145
  -151
  -158
  -166
  -174
  -182
  -191
  -200
  -209
  -220
  -230
  -242
  -253
  -266
Depreciation, amort., depletion, $m
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
Funds from operations, $m
  30
  -96
  -82
  -85
  -87
  -90
  -93
  -96
  -99
  -103
  -107
  -112
  -116
  -121
  -127
  -132
  -138
  -144
  -151
  -158
  -165
  -173
  -181
  -190
  -199
  -209
  -219
  -230
  -241
  -253
  -265
Change in working capital, $m
  -8
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  38
  -96
  -82
  -84
  -87
  -90
  -92
  -96
  -99
  -103
  -107
  -111
  -116
  -121
  -126
  -132
  -138
  -144
  -151
  -158
  -165
  -173
  -181
  -190
  -199
  -208
  -218
  -229
  -240
  -252
  -264
Maintenance CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
New CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from investing activities, $m
  -40
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
Free cash flow, $m
  -2
  -96
  -82
  -85
  -87
  -90
  -93
  -96
  -100
  -103
  -107
  -112
  -116
  -121
  -127
  -132
  -138
  -144
  -151
  -158
  -165
  -173
  -181
  -190
  -199
  -209
  -219
  -230
  -241
  -253
  -265
Issuance/(repayment) of debt, $m
  -9
  -246
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
Issuance/(repurchase) of shares, $m
  0
  343
  83
  85
  87
  90
  93
  96
  100
  104
  108
  112
  117
  122
  127
  133
  139
  145
  152
  159
  166
  174
  182
  191
  200
  210
  220
  231
  242
  254
  266
Cash from financing (excl. dividends), $m  
  -9
  97
  84
  86
  88
  91
  94
  97
  101
  106
  110
  114
  119
  124
  129
  135
  141
  147
  155
  162
  169
  177
  185
  194
  204
  214
  224
  235
  246
  259
  271
Total cash flow (excl. dividends), $m
  -11
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
Retained Cash Flow (-), $m
  -25
  -343
  -83
  -85
  -87
  -90
  -93
  -96
  -100
  -104
  -108
  -112
  -117
  -122
  -127
  -133
  -139
  -145
  -152
  -159
  -166
  -174
  -182
  -191
  -200
  -210
  -220
  -231
  -242
  -254
  -266
Prev. year cash balance distribution, $m
 
  261
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -81
  -82
  -84
  -86
  -89
  -92
  -95
  -98
  -102
  -106
  -110
  -115
  -119
  -125
  -130
  -136
  -142
  -148
  -155
  -162
  -170
  -178
  -187
  -196
  -205
  -215
  -225
  -236
  -248
  -260
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  -78
  -75
  -73
  -71
  -69
  -66
  -64
  -61
  -58
  -55
  -52
  -49
  -45
  -42
  -38
  -34
  -31
  -27
  -24
  -21
  -18
  -15
  -12
  -10
  -8
  -6
  -5
  -4
  -3
  -2
Current shareholders' claim on cash, %
  100
  50.0
  9.2
  1.7
  0.3
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

VIVUS, Inc. is a biopharmaceutical company. The Company operates in the development and commercialization of therapeutic products segment. It provides over two therapies approved by the Food and Drug Association (FDA), which include Qsymia (phentermine and topiramate extended-release) for chronic weight management and STENDRA (avanafil) for erectile dysfunction (ED). The Company has completed the Phase II studies of Qsymia for the indication of Obstructive Sleep Apnea (OSA) and diabetes. Its Qsymia is available in over 40,000 certified retail pharmacies across the country. Its STENDRA is also approved by the European Commission (EC), under the name, SPEDRA, for the treatment of ED in the Europe. The United States Food and Drug Association approved a Supplemental New Drug Application (sNDA) for STENDRA. STENDRA is indicated to be taken approximately 15 minutes before sexual activity.

FINANCIAL RATIOS  of  VIVUS (VVUS)

Valuation Ratios
P/E Ratio 3.9
Price to Sales 0.7
Price to Book 5
Price to Tangible Book
Price to Cash Flow 2.4
Price to Free Cash Flow 2.4
Growth Rates
Sales Growth Rate 30.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio 30
Current Ratio 0
LT Debt to Equity 1288.9%
Total Debt to Equity 1338.9%
Interest Coverage 3
Management Effectiveness
Return On Assets 13%
Ret/ On Assets - 3 Yr. Avg. -8.6%
Return On Total Capital 9.5%
Ret/ On T. Cap. - 3 Yr. Avg. -16.6%
Return On Equity 418.2%
Return On Equity - 3 Yr. Avg. 34.4%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 91.9%
Gross Margin - 3 Yr. Avg. 75.7%
EBITDA Margin 31.5%
EBITDA Margin - 3 Yr. Avg. -33.3%
Operating Margin 44.4%
Oper. Margin - 3 Yr. Avg. -21.5%
Pre-Tax Margin 18.5%
Pre-Tax Margin - 3 Yr. Avg. -50.7%
Net Profit Margin 18.5%
Net Profit Margin - 3 Yr. Avg. -50.7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

VVUS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VVUS stock intrinsic value calculation we used $124 million for the last fiscal year's total revenue generated by VIVUS. The default revenue input number comes from 2016 income statement of VIVUS. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our VVUS stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for VVUS is calculated based on our internal credit rating of VIVUS, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of VIVUS.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of VVUS stock the variable cost ratio is equal to 164.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for VVUS stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 6.4% for VIVUS.

Corporate tax rate of 27% is the nominal tax rate for VIVUS. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the VVUS stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for VVUS are equal to 0.8%.

Life of production assets of 1 years is the average useful life of capital assets used in VIVUS operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for VVUS is equal to -4.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $18 million for VIVUS - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 106.457 million for VIVUS is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of VIVUS at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ ETFs with exposure to VIVUS, Inc. : October 9, 2017   [Oct-09-17 12:11PM  Capital Cube]
▶ VIVUS Reports Second Quarter 2017 Financial Results   [Aug-03-17 04:15PM  Marketwired]
▶ ETFs with exposure to VIVUS, Inc. : May 30, 2017   [May-30-17 12:50PM  Capital Cube]
Financial statements of VVUS
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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