Intrinsic value of Lifevantage Corporation - LFVN

Previous Close

$12.07

  Intrinsic Value

$7.19

stock screener

  Rating & Target

sell

-40%

Previous close

$12.07

 
Intrinsic value

$7.19

 
Up/down potential

-40%

 
Rating

sell

We calculate the intrinsic value of LFVN 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 0001), $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 0.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  17.60
  16.34
  15.21
  14.19
  13.27
  12.44
  11.70
  11.03
  10.42
  9.88
  9.39
  8.95
  8.56
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.90
  5.81
  5.73
  5.66
  5.59
Revenue, $m
  239
  278
  320
  365
  414
  465
  520
  577
  637
  700
  766
  835
  906
  980
  1,058
  1,138
  1,221
  1,308
  1,398
  1,492
  1,589
  1,691
  1,796
  1,906
  2,020
  2,140
  2,264
  2,394
  2,529
  2,671
Variable operating expenses, $m
  233
  271
  312
  356
  403
  454
  507
  562
  621
  682
  746
  813
  883
  955
  1,031
  1,109
  1,190
  1,275
  1,362
  1,454
  1,549
  1,648
  1,750
  1,857
  1,969
  2,085
  2,206
  2,333
  2,465
  2,603
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
  233
  271
  312
  356
  403
  454
  507
  562
  621
  682
  746
  813
  883
  955
  1,031
  1,109
  1,190
  1,275
  1,362
  1,454
  1,549
  1,648
  1,750
  1,857
  1,969
  2,085
  2,206
  2,333
  2,465
  2,603
Operating income, $m
  6
  7
  8
  9
  10
  12
  13
  15
  16
  18
  20
  21
  23
  25
  27
  29
  31
  33
  36
  38
  41
  43
  46
  49
  52
  55
  58
  61
  64
  68
EBITDA, $m
  7
  9
  10
  11
  13
  14
  16
  18
  20
  22
  24
  26
  28
  30
  33
  35
  38
  40
  43
  46
  49
  52
  55
  59
  62
  66
  70
  74
  78
  83
Interest expense (income), $m
  0
  0
  1
  1
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
Earnings before tax, $m
  6
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  25
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
Tax expense, $m
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
Net income, $m
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  15
  16
  17
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  60
  70
  81
  92
  104
  117
  131
  145
  161
  176
  193
  210
  228
  247
  266
  287
  308
  330
  352
  376
  400
  426
  453
  480
  509
  539
  570
  603
  637
  673
Adjusted assets (=assets-cash), $m
  60
  70
  81
  92
  104
  117
  131
  145
  161
  176
  193
  210
  228
  247
  266
  287
  308
  330
  352
  376
  400
  426
  453
  480
  509
  539
  570
  603
  637
  673
Revenue / Adjusted assets
  3.983
  3.971
  3.951
  3.967
  3.981
  3.974
  3.969
  3.979
  3.957
  3.977
  3.969
  3.976
  3.974
  3.968
  3.977
  3.965
  3.964
  3.964
  3.972
  3.968
  3.973
  3.969
  3.965
  3.971
  3.969
  3.970
  3.972
  3.970
  3.970
  3.969
Average production assets, $m
  6
  7
  9
  10
  11
  13
  14
  16
  17
  19
  21
  23
  24
  26
  29
  31
  33
  35
  38
  40
  43
  46
  48
  51
  55
  58
  61
  65
  68
  72
Working capital, $m
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
Total debt, $m
  11
  16
  22
  29
  36
  43
  51
  59
  68
  77
  86
  96
  107
  117
  128
  140
  152
  164
  177
  191
  205
  219
  235
  250
  267
  284
  302
  321
  340
  360
Total liabilities, $m
  34
  40
  46
  53
  60
  67
  75
  83
  92
  101
  110
  120
  130
  141
  152
  164
  176
  188
  201
  215
  229
  243
  258
  274
  291
  308
  326
  344
  364
  384
Total equity, $m
  26
  30
  35
  39
  45
  50
  56
  62
  69
  76
  83
  90
  98
  106
  114
  123
  132
  141
  151
  161
  172
  183
  194
  206
  218
  231
  245
  259
  273
  289
Total liabilities and equity, $m
  60
  70
  81
  92
  105
  117
  131
  145
  161
  177
  193
  210
  228
  247
  266
  287
  308
  329
  352
  376
  401
  426
  452
  480
  509
  539
  571
  603
  637
  673
Debt-to-equity ratio
  0.410
  0.540
  0.640
  0.730
  0.800
  0.860
  0.910
  0.950
  0.990
  1.020
  1.040
  1.070
  1.090
  1.110
  1.120
  1.140
  1.150
  1.160
  1.170
  1.180
  1.190
  1.200
  1.210
  1.220
  1.220
  1.230
  1.230
  1.240
  1.240
  1.250
Adjusted equity ratio
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  15
  16
  17
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
Depreciation, amort., depletion, $m
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
Funds from operations, $m
  5
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  19
  21
  22
  24
  25
  27
  28
  30
  32
  34
  36
  38
  40
  42
  44
  47
Change in working capital, $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 from operations, $m
  5
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  19
  21
  22
  23
  25
  26
  28
  30
  32
  33
  35
  37
  39
  42
  44
  46
Maintenance CAPEX, $m
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
New CAPEX, $m
  -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
  -3
  -3
  -4
  -4
  -4
Cash from investing activities, $m
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
Free cash flow, $m
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  14
  15
  16
  17
  18
  20
  21
  22
  23
  24
  26
  27
  29
Issuance/(repayment) of debt, $m
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
Total cash flow (excl. dividends), $m
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  28
  30
  31
  33
  35
  37
  38
  40
  42
  45
  47
  49
Retained Cash Flow (-), $m
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
Prev. year cash balance distribution, $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 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
  5
  5
  6
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  15
  16
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
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
  4
  5
  5
  5
  5
  5
  5
  6
  5
  5
  5
  5
  5
  5
  4
  4
  4
  3
  3
  3
  2
  2
  2
  1
  1
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  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
  100.0

LifeVantage Corporation is a science-based network marketing company. The Company focuses on helping people achieve their health, wellness and financial independence goals. The Company provides products and a financially rewarding direct sales business opportunity to customers and independent distributors seeking a healthy lifestyle and financial freedom. It sells its products to preferred customers, retail customers and independent distributors located in the United States, Japan, Hong Kong, Australia, Canada, Philippines, Mexico, Thailand and the United Kingdom. The Company engages in the identification, research, development and distribution of advanced nutraceutical dietary supplements and skin care products, including Protandim, its scientifically-validated dietary supplement; LifeVantage TrueScience, its line of anti-aging skin care products; Canine Health; Axio, its energy drink mixes, and PhysIQ.

FINANCIAL RATIOS  of  Lifevantage Corporation (LFVN)

Valuation Ratios
P/E Ratio 85.9
Price to Sales 0.9
Price to Book 11.5
Price to Tangible Book
Price to Cash Flow 24.5
Price to Free Cash Flow 28.6
Growth Rates
Sales Growth Rate -3.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -12.9%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 40%
Total Debt to Equity 53.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 4.2%
Ret/ On Assets - 3 Yr. Avg. 12.6%
Return On Total Capital 9.1%
Ret/ On T. Cap. - 3 Yr. Avg. 19.6%
Return On Equity 15.4%
Return On Equity - 3 Yr. Avg. 100.4%
Asset Turnover 4.1
Profitability Ratios
Gross Margin 83.4%
Gross Margin - 3 Yr. Avg. 84.1%
EBITDA Margin 2.5%
EBITDA Margin - 3 Yr. Avg. 5.6%
Operating Margin 2%
Oper. Margin - 3 Yr. Avg. 5.4%
Pre-Tax Margin 1.5%
Pre-Tax Margin - 3 Yr. Avg. 3.9%
Net Profit Margin 1%
Net Profit Margin - 3 Yr. Avg. 2.5%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 34.3%
Payout Ratio 0%

LFVN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LFVN stock intrinsic value calculation we used $203 million for the last fiscal year's total revenue generated by Lifevantage Corporation. The default revenue input number comes from 0001 income statement of Lifevantage Corporation. 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 LFVN stock valuation model: a) initial revenue growth rate of 17.6% 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 LFVN is calculated based on our internal credit rating of Lifevantage Corporation, 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 Lifevantage Corporation.
    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 LFVN stock the variable cost ratio is equal to 97.5%.

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 LFVN 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 7.1% for Lifevantage Corporation.

Corporate tax rate of 27% is the nominal tax rate for Lifevantage Corporation. 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 LFVN 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 LFVN are equal to 2.7%.

Life of production assets of 4.6 years is the average useful life of capital assets used in Lifevantage Corporation 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 LFVN is equal to 0.2%. 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 - $21.947 million for Lifevantage Corporation - 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 14.284 million for Lifevantage Corporation 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 Lifevantage Corporation at the current share price and the inputted number of shares is $0.2 billion.

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