Intrinsic value of Vanda Pharmaceuticals Inc. - VNDA

Previous Close

$12.99

  Intrinsic Value

$1.19

stock screener

  Rating & Target

str. sell

-91%

Previous close

$12.99

 
Intrinsic value

$1.19

 
Up/down potential

-91%

 
Rating

str. sell

We calculate the intrinsic value of VNDA 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 0.7

 

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, %
  19.80
  18.32
  16.99
  15.79
  14.71
  13.74
  12.87
  12.08
  11.37
  10.73
  10.16
  9.64
  9.18
  8.76
  8.39
  8.05
  7.74
  7.47
  7.22
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
Revenue, $m
  231
  274
  320
  371
  425
  483
  546
  612
  681
  754
  831
  911
  995
  1,082
  1,173
  1,267
  1,365
  1,467
  1,573
  1,683
  1,797
  1,916
  2,040
  2,169
  2,303
  2,443
  2,588
  2,740
  2,898
  3,063
Variable operating expenses, $m
  255
  301
  352
  407
  466
  530
  598
  670
  746
  825
  907
  994
  1,085
  1,180
  1,279
  1,382
  1,489
  1,601
  1,716
  1,836
  1,961
  2,091
  2,226
  2,366
  2,513
  2,665
  2,824
  2,989
  3,162
  3,342
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
  255
  301
  352
  407
  466
  530
  598
  670
  746
  825
  907
  994
  1,085
  1,180
  1,279
  1,382
  1,489
  1,601
  1,716
  1,836
  1,961
  2,091
  2,226
  2,366
  2,513
  2,665
  2,824
  2,989
  3,162
  3,342
Operating income, $m
  -24
  -27
  -32
  -36
  -41
  -47
  -52
  -58
  -65
  -71
  -76
  -83
  -91
  -98
  -107
  -115
  -124
  -134
  -143
  -153
  -164
  -174
  -186
  -197
  -210
  -222
  -236
  -249
  -264
  -279
EBITDA, $m
  -19
  -22
  -26
  -30
  -35
  -40
  -45
  -50
  -56
  -62
  -68
  -75
  -82
  -89
  -96
  -104
  -112
  -120
  -129
  -138
  -148
  -157
  -168
  -178
  -189
  -201
  -213
  -225
  -238
  -252
Interest expense (income), $m
  0
  0
  1
  1
  2
  3
  4
  5
  6
  7
  8
  9
  10
  11
  13
  14
  16
  17
  19
  20
  22
  24
  25
  27
  29
  31
  34
  36
  38
  40
  43
Earnings before tax, $m
  -24
  -28
  -33
  -38
  -44
  -50
  -57
  -64
  -71
  -79
  -85
  -93
  -102
  -111
  -121
  -131
  -141
  -152
  -163
  -175
  -187
  -200
  -213
  -227
  -241
  -256
  -271
  -287
  -304
  -322
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
Net income, $m
  -24
  -28
  -33
  -38
  -44
  -50
  -57
  -64
  -71
  -79
  -85
  -93
  -102
  -111
  -121
  -131
  -141
  -152
  -163
  -175
  -187
  -200
  -213
  -227
  -241
  -256
  -271
  -287
  -304
  -322

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
  153
  181
  212
  245
  282
  320
  361
  405
  451
  500
  550
  603
  659
  716
  777
  839
  904
  971
  1,042
  1,115
  1,190
  1,269
  1,351
  1,436
  1,525
  1,618
  1,714
  1,814
  1,919
  2,028
Adjusted assets (=assets-cash), $m
  153
  181
  212
  245
  282
  320
  361
  405
  451
  500
  550
  603
  659
  716
  777
  839
  904
  971
  1,042
  1,115
  1,190
  1,269
  1,351
  1,436
  1,525
  1,618
  1,714
  1,814
  1,919
  2,028
Revenue / Adjusted assets
  1.510
  1.514
  1.509
  1.514
  1.507
  1.509
  1.512
  1.511
  1.510
  1.508
  1.511
  1.511
  1.510
  1.511
  1.510
  1.510
  1.510
  1.511
  1.510
  1.509
  1.510
  1.510
  1.510
  1.510
  1.510
  1.510
  1.510
  1.510
  1.510
  1.510
Average production assets, $m
  21
  25
  29
  34
  39
  44
  50
  56
  62
  69
  76
  83
  91
  98
  107
  115
  124
  133
  143
  153
  164
  174
  186
  197
  210
  222
  236
  249
  264
  279
Working capital, $m
  -13
  -16
  -19
  -21
  -25
  -28
  -32
  -35
  -40
  -44
  -48
  -53
  -58
  -63
  -68
  -73
  -79
  -85
  -91
  -98
  -104
  -111
  -118
  -126
  -134
  -142
  -150
  -159
  -168
  -178
Total debt, $m
  11
  24
  37
  52
  68
  85
  104
  123
  144
  165
  188
  211
  236
  261
  288
  316
  345
  375
  406
  438
  472
  507
  543
  581
  620
  662
  704
  749
  795
  844
Total liabilities, $m
  68
  80
  94
  109
  125
  142
  160
  180
  200
  222
  244
  268
  292
  318
  345
  373
  401
  431
  462
  495
  529
  563
  600
  638
  677
  718
  761
  806
  852
  901
Total equity, $m
  85
  101
  118
  136
  157
  178
  201
  225
  251
  278
  306
  335
  366
  398
  432
  466
  503
  540
  579
  620
  662
  706
  751
  799
  848
  899
  953
  1,009
  1,067
  1,128
Total liabilities and equity, $m
  153
  181
  212
  245
  282
  320
  361
  405
  451
  500
  550
  603
  658
  716
  777
  839
  904
  971
  1,041
  1,115
  1,191
  1,269
  1,351
  1,437
  1,525
  1,617
  1,714
  1,815
  1,919
  2,029
Debt-to-equity ratio
  0.130
  0.240
  0.320
  0.380
  0.440
  0.480
  0.520
  0.550
  0.570
  0.590
  0.610
  0.630
  0.640
  0.660
  0.670
  0.680
  0.690
  0.690
  0.700
  0.710
  0.710
  0.720
  0.720
  0.730
  0.730
  0.740
  0.740
  0.740
  0.750
  0.750
Adjusted equity ratio
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -24
  -28
  -33
  -38
  -44
  -50
  -57
  -64
  -71
  -79
  -85
  -93
  -102
  -111
  -121
  -131
  -141
  -152
  -163
  -175
  -187
  -200
  -213
  -227
  -241
  -256
  -271
  -287
  -304
  -322
Depreciation, amort., depletion, $m
  5
  5
  5
  6
  6
  7
  7
  8
  9
  9
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  24
  26
  27
Funds from operations, $m
  -19
  -23
  -28
  -32
  -38
  -43
  -49
  -56
  -63
  -70
  -77
  -85
  -93
  -102
  -110
  -120
  -129
  -139
  -149
  -160
  -171
  -183
  -195
  -207
  -221
  -234
  -248
  -263
  -278
  -295
Change in working capital, $m
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
Cash from operations, $m
  -17
  -21
  -25
  -30
  -35
  -40
  -46
  -52
  -59
  -65
  -73
  -80
  -88
  -97
  -105
  -114
  -123
  -133
  -143
  -154
  -165
  -176
  -188
  -200
  -213
  -226
  -240
  -254
  -269
  -285
Maintenance CAPEX, $m
  -2
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -26
New CAPEX, $m
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
Cash from investing activities, $m
  -6
  -6
  -6
  -8
  -8
  -9
  -10
  -11
  -11
  -13
  -14
  -14
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -34
  -35
  -37
  -38
  -41
Free cash flow, $m
  -22
  -27
  -32
  -37
  -43
  -49
  -56
  -63
  -70
  -78
  -86
  -95
  -104
  -113
  -123
  -133
  -144
  -155
  -166
  -178
  -190
  -203
  -216
  -230
  -244
  -259
  -275
  -291
  -308
  -326
Issuance/(repayment) of debt, $m
  11
  12
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  43
  45
  47
  49
Issuance/(repurchase) of shares, $m
  38
  44
  50
  57
  64
  72
  80
  88
  97
  106
  113
  123
  133
  143
  154
  166
  177
  190
  202
  216
  229
  244
  259
  274
  290
  307
  325
  343
  363
  383
Cash from financing (excl. dividends), $m  
  49
  56
  64
  72
  80
  89
  98
  107
  117
  127
  136
  147
  158
  169
  181
  194
  206
  220
  233
  248
  263
  279
  295
  312
  329
  348
  368
  388
  410
  432
Total cash flow (excl. dividends), $m
  27
  30
  32
  35
  37
  40
  42
  45
  47
  49
  49
  51
  53
  56
  58
  60
  63
  65
  68
  70
  73
  76
  79
  82
  86
  89
  93
  97
  101
  105
Retained Cash Flow (-), $m
  -38
  -44
  -50
  -57
  -64
  -72
  -80
  -88
  -97
  -106
  -113
  -123
  -133
  -143
  -154
  -166
  -177
  -190
  -202
  -216
  -229
  -244
  -259
  -274
  -290
  -307
  -325
  -343
  -363
  -383
Prev. year cash balance distribution, $m
  204
  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
  194
  -14
  -18
  -22
  -27
  -32
  -38
  -43
  -50
  -57
  -64
  -71
  -79
  -88
  -96
  -105
  -115
  -125
  -135
  -145
  -156
  -168
  -180
  -192
  -205
  -218
  -232
  -247
  -262
  -277
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
  186
  -13
  -16
  -18
  -21
  -23
  -25
  -27
  -29
  -30
  -30
  -30
  -30
  -29
  -28
  -27
  -25
  -23
  -21
  -18
  -16
  -14
  -12
  -10
  -8
  -6
  -5
  -4
  -3
  -2
Current shareholders' claim on cash, %
  82.4
  68.3
  56.9
  47.7
  40.1
  33.8
  28.7
  24.4
  20.8
  17.8
  15.3
  13.1
  11.3
  9.8
  8.5
  7.3
  6.4
  5.5
  4.8
  4.2
  3.6
  3.2
  2.8
  2.4
  2.1
  1.8
  1.6
  1.4
  1.2
  1.1

Vanda Pharmaceuticals Inc. is a biopharmaceutical company. The Company is focused on the development and commercialization of therapies to address unmet medical needs. Its product portfolio includes HETLIOZ (tasimelteon), Fanapt (iloperidone), Tradipitant (VLY-686), Trichostatin A and AQW051. It offers HETLIOZ for the treatment of Non-24-Hour Sleep-Wake Disorder (Non-24). HETLIOZ is in clinical development for the treatment of Pediatric Non-24, Jet Lag Disorder and Smith-Magenis Syndrome. It offers Fanapt for the treatment of schizophrenia. Fanapt has potential utility in various other disorders. Tradipitant is a small molecule neurokinin-1 receptor (NK-1R) antagonist, which is in clinical development for the treatment of chronic pruritus in atopic dermatitis. Trichostatin A is a small molecule histone deacetylase (HDAC) inhibitor. AQW051 is a Phase II alpha-7 nicotinic acetylcholine receptor partial agonist. AQW051 is indicated for the treatment of central nervous system disorders.

FINANCIAL RATIOS  of  Vanda Pharmaceuticals Inc. (VNDA)

Valuation Ratios
P/E Ratio -31.8
Price to Sales 3.9
Price to Book 4.4
Price to Tangible Book
Price to Cash Flow -71.4
Price to Free Cash Flow -63.5
Growth Rates
Sales Growth Rate 32.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -66.7%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -8.5%
Ret/ On Assets - 3 Yr. Avg. -5.5%
Return On Total Capital -13.6%
Ret/ On T. Cap. - 3 Yr. Avg. -7.1%
Return On Equity -13.6%
Return On Equity - 3 Yr. Avg. -7.1%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 82.9%
Gross Margin - 3 Yr. Avg. 86.4%
EBITDA Margin -4.1%
EBITDA Margin - 3 Yr. Avg. 6.1%
Operating Margin -13%
Oper. Margin - 3 Yr. Avg. -3.1%
Pre-Tax Margin -12.3%
Pre-Tax Margin - 3 Yr. Avg. -2.9%
Net Profit Margin -12.3%
Net Profit Margin - 3 Yr. Avg. -2.9%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

VNDA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VNDA stock intrinsic value calculation we used $193 million for the last fiscal year's total revenue generated by Vanda Pharmaceuticals Inc.. The default revenue input number comes from 0001 income statement of Vanda Pharmaceuticals Inc.. 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 VNDA stock valuation model: a) initial revenue growth rate of 19.8% 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 VNDA is calculated based on our internal credit rating of Vanda Pharmaceuticals Inc., 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 Vanda Pharmaceuticals Inc..
    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 VNDA stock the variable cost ratio is equal to 110.4%.

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 VNDA 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 5.4% for Vanda Pharmaceuticals Inc..

Corporate tax rate of 27% is the nominal tax rate for Vanda Pharmaceuticals Inc.. 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 VNDA 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 VNDA are equal to 9.1%.

Life of production assets of 10.2 years is the average useful life of capital assets used in Vanda Pharmaceuticals Inc. 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 VNDA is equal to -5.8%. 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 - $275.422 million for Vanda Pharmaceuticals Inc. - 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 52.643 million for Vanda Pharmaceuticals Inc. 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 Vanda Pharmaceuticals Inc. at the current share price and the inputted number of shares is $0.7 billion.

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