Intrinsic value of Vanda Pharmaceuticals - VNDA

Previous Close

$22.62

  Intrinsic Value

$3.16

stock screener

  Rating & Target

str. sell

-86%

Previous close

$22.62

 
Intrinsic value

$3.16

 
Up/down potential

-86%

 
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 1.2

 

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, %
  12.60
  11.84
  11.16
  10.54
  9.99
  9.49
  9.04
  8.64
  8.27
  7.94
  7.65
  7.38
  7.15
  6.93
  6.74
  6.56
  6.41
  6.27
  6.14
  6.03
  5.92
  5.83
  5.75
  5.67
  5.61
  5.55
  5.49
  5.44
  5.40
  5.36
Revenue, $m
  186
  208
  231
  255
  281
  308
  335
  364
  395
  426
  458
  492
  527
  564
  602
  642
  683
  725
  770
  816
  865
  915
  968
  1,023
  1,080
  1,140
  1,203
  1,268
  1,336
  1,408
Variable operating expenses, $m
  170
  190
  210
  232
  255
  279
  304
  330
  357
  386
  412
  443
  474
  507
  541
  577
  614
  652
  692
  734
  778
  823
  870
  920
  971
  1,025
  1,081
  1,140
  1,202
  1,266
Fixed operating expenses, $m
  33
  33
  34
  35
  36
  36
  37
  38
  39
  40
  41
  42
  42
  43
  44
  45
  46
  47
  48
  49
  51
  52
  53
  54
  55
  56
  58
  59
  60
  61
Total operating expenses, $m
  203
  223
  244
  267
  291
  315
  341
  368
  396
  426
  453
  485
  516
  550
  585
  622
  660
  699
  740
  783
  829
  875
  923
  974
  1,026
  1,081
  1,139
  1,199
  1,262
  1,327
Operating income, $m
  -17
  -15
  -13
  -12
  -10
  -8
  -6
  -4
  -2
  1
  6
  8
  11
  13
  16
  19
  22
  26
  29
  33
  37
  41
  45
  49
  54
  59
  64
  69
  75
  80
EBITDA, $m
  -12
  -10
  -8
  -6
  -4
  -2
  0
  2
  5
  8
  10
  13
  16
  19
  23
  26
  30
  33
  37
  41
  46
  50
  55
  60
  65
  70
  76
  82
  89
  95
Interest expense (income), $m
  0
  0
  1
  1
  2
  2
  3
  3
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  24
  25
  27
  28
Earnings before tax, $m
  -17
  -16
  -15
  -13
  -12
  -11
  -10
  -8
  -7
  -5
  -1
  1
  3
  5
  7
  9
  11
  13
  16
  18
  21
  24
  27
  30
  33
  36
  40
  44
  48
  52
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  2
  2
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
Net income, $m
  -17
  -16
  -15
  -13
  -12
  -11
  -10
  -8
  -7
  -5
  -1
  1
  2
  3
  5
  6
  8
  10
  11
  13
  15
  17
  19
  22
  24
  27
  29
  32
  35
  38

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
  149
  167
  185
  205
  225
  247
  269
  292
  317
  342
  368
  395
  423
  453
  483
  515
  548
  582
  618
  655
  694
  735
  777
  821
  867
  915
  965
  1,018
  1,073
  1,130
Adjusted assets (=assets-cash), $m
  149
  167
  185
  205
  225
  247
  269
  292
  317
  342
  368
  395
  423
  453
  483
  515
  548
  582
  618
  655
  694
  735
  777
  821
  867
  915
  965
  1,018
  1,073
  1,130
Revenue / Adjusted assets
  1.248
  1.246
  1.249
  1.244
  1.249
  1.247
  1.245
  1.247
  1.246
  1.246
  1.245
  1.246
  1.246
  1.245
  1.246
  1.247
  1.246
  1.246
  1.246
  1.246
  1.246
  1.245
  1.246
  1.246
  1.246
  1.246
  1.247
  1.246
  1.245
  1.246
Average production assets, $m
  21
  23
  26
  29
  32
  35
  38
  41
  45
  48
  52
  56
  60
  64
  68
  72
  77
  82
  87
  92
  98
  103
  109
  116
  122
  129
  136
  143
  151
  159
Working capital, $m
  -49
  -55
  -61
  -68
  -75
  -82
  -89
  -97
  -105
  -113
  -122
  -131
  -140
  -150
  -160
  -171
  -182
  -193
  -205
  -217
  -230
  -243
  -257
  -272
  -287
  -303
  -320
  -337
  -355
  -375
Total debt, $m
  9
  19
  30
  41
  52
  64
  76
  89
  103
  117
  132
  147
  163
  179
  196
  214
  232
  251
  271
  292
  314
  337
  360
  385
  411
  437
  465
  495
  526
  558
Total liabilities, $m
  83
  93
  104
  115
  126
  138
  150
  163
  177
  191
  206
  221
  237
  253
  270
  288
  306
  325
  345
  366
  388
  411
  434
  459
  485
  511
  540
  569
  600
  632
Total equity, $m
  66
  74
  82
  90
  99
  109
  119
  129
  140
  151
  162
  174
  187
  200
  213
  227
  242
  257
  273
  289
  306
  324
  343
  362
  382
  403
  426
  449
  473
  498
Total liabilities and equity, $m
  149
  167
  186
  205
  225
  247
  269
  292
  317
  342
  368
  395
  424
  453
  483
  515
  548
  582
  618
  655
  694
  735
  777
  821
  867
  914
  966
  1,018
  1,073
  1,130
Debt-to-equity ratio
  0.140
  0.260
  0.360
  0.450
  0.520
  0.590
  0.640
  0.690
  0.740
  0.780
  0.810
  0.840
  0.870
  0.900
  0.920
  0.940
  0.960
  0.980
  1.000
  1.010
  1.030
  1.040
  1.050
  1.060
  1.070
  1.080
  1.090
  1.100
  1.110
  1.120
Adjusted equity ratio
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -17
  -16
  -15
  -13
  -12
  -11
  -10
  -8
  -7
  -5
  -1
  1
  2
  3
  5
  6
  8
  10
  11
  13
  15
  17
  19
  22
  24
  27
  29
  32
  35
  38
Depreciation, amort., depletion, $m
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
Funds from operations, $m
  -12
  -11
  -9
  -8
  -7
  -5
  -3
  -2
  0
  2
  4
  6
  8
  9
  11
  13
  15
  17
  19
  22
  24
  27
  30
  32
  35
  38
  42
  45
  49
  53
Change in working capital, $m
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
Cash from operations, $m
  -6
  -5
  -3
  -2
  0
  2
  4
  6
  8
  10
  13
  15
  17
  19
  21
  24
  26
  29
  31
  34
  37
  40
  44
  47
  51
  54
  58
  63
  67
  72
Maintenance CAPEX, $m
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
New CAPEX, $m
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
Cash from investing activities, $m
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
Free cash flow, $m
  -11
  -9
  -8
  -7
  -5
  -4
  -2
  -1
  1
  3
  5
  6
  8
  9
  11
  13
  15
  17
  19
  21
  23
  26
  28
  31
  33
  36
  39
  43
  46
  50
Issuance/(repayment) of debt, $m
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
Issuance/(repurchase) of shares, $m
  24
  23
  23
  22
  21
  20
  19
  18
  17
  16
  12
  11
  10
  10
  9
  8
  7
  5
  4
  3
  2
  1
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  33
  33
  33
  33
  32
  32
  31
  31
  31
  30
  27
  26
  26
  26
  26
  26
  25
  24
  24
  24
  24
  24
  24
  25
  26
  27
  28
  29
  31
  32
Total cash flow (excl. dividends), $m
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  52
  55
  59
  63
  68
  72
  77
  82
Retained Cash Flow (-), $m
  -24
  -23
  -23
  -22
  -21
  -20
  -19
  -18
  -17
  -16
  -12
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
Prev. year cash balance distribution, $m
  73
  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
  72
  0
  2
  4
  6
  8
  10
  12
  14
  17
  19
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  36
  39
  42
  45
  49
  53
  56
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
  69
  0
  2
  3
  5
  6
  7
  8
  8
  9
  9
  9
  8
  8
  7
  6
  5
  5
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
  1
  0
Current shareholders' claim on cash, %
  95.6
  92.0
  88.9
  86.3
  84.1
  82.3
  80.7
  79.3
  78.1
  77.1
  76.4
  75.8
  75.3
  74.9
  74.6
  74.3
  74.0
  73.8
  73.7
  73.6
  73.6
  73.5
  73.5
  73.5
  73.5
  73.5
  73.5
  73.5
  73.5
  73.5

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 (VNDA)

Valuation Ratios
P/E Ratio -55.3
Price to Sales 6.8
Price to Book 7.6
Price to Tangible Book
Price to Cash Flow -124.4
Price to Free Cash Flow -110.6
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 $165.083 million for the last fiscal year's total revenue generated by Vanda Pharmaceuticals. The default revenue input number comes from 0001 income statement of Vanda Pharmaceuticals. 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 12.6% 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 VNDA is calculated based on our internal credit rating of Vanda Pharmaceuticals, 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.
    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 91.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $32 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.

Corporate tax rate of 27% is the nominal tax rate for Vanda Pharmaceuticals. 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 11.3%.

Life of production assets of 10.8 years is the average useful life of capital assets used in Vanda Pharmaceuticals 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 -26.6%. 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 - $131.387 million for Vanda Pharmaceuticals - 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 52.111 million for Vanda Pharmaceuticals 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 at the current share price and the inputted number of shares is $1.2 billion.

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COMPANY NEWS

▶ Vanda: 3Q Earnings Snapshot   [05:22PM  Associated Press]
▶ The FDA is cracking down on a local drugmaker. The company isn't completely sure why.   [Nov-02-18 02:06PM  American City Business Journals]
▶ This IBD Stock Of The Day Is Heading For Fourth Quarter Of Profitability   [Oct-23-18 04:41PM  Investor's Business Daily]
▶ Here's Why The Stock Market Sold Off After The Fed Meeting   [04:19PM  Investor's Business Daily]
▶ Vanda Wins Denial of Petition For Rehearing on Fanapt®   [Aug-14-18 04:45PM  PR Newswire]
▶ Vanda: 2Q Earnings Snapshot   [04:42PM  Associated Press]
▶ Stocks Generating Improved Relative Strength: Vanda Pharmaceuticals   [May-24-18 03:00AM  Investor's Business Daily]
▶ Vanda: 1Q Earnings Snapshot   [May-02-18 05:43PM  Associated Press]
▶ 4 Top Efficient Stocks to Buy for Stellar Returns   [Apr-26-18 12:35PM  InvestorPlace]
▶ Vanda Wins Appeal Case on Fanapt®   [Apr-13-18 12:00PM  PR Newswire]
▶ A drug for jet lag? A D.C. biotech says it just got a lot closer.   [Mar-05-18 09:24PM  American City Business Journals]
▶ Vanda reports 3Q loss   [Nov-07-17 05:14PM  Associated Press]
▶ Vanda to Present Scientific Posters at World Sleep 2017   [Sep-29-17 01:00PM  PR Newswire]
▶ Is It Too Late To Buy Vanda Pharmaceuticals Inc (VNDA)?   [Sep-14-17 10:25AM  Simply Wall St.]

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