The Female Health Company (VERU) company research.
About Female Health Company (VERU)
The Female Health Company owns rights to the FC2 Female Condom. FC2 is a revolutionary, female-initiated option offering women dual protection against sexually transmitted infections (S.T.I.’s), including HIV/AIDS, and unintended pregnancy. Further, FHCO currently has the only female condom (FC2) which is both approved by FDA and cleared for purchase by WHO. Furthermore, more than 50% of adult HIV/AIDS cases are female, 80% of which are contracted via heterosexual sex. HIV/AIDS is the number one cause of death globally for women 15-44 years old.
Another is, Female Health Company’s main market is currently the public health sector, which distributes FC2 to more than 143 countries worldwide for use in prevention and family planning programs. Likewise, the company’s customer base consists primarily of a small number of customers who purchase large quantities. Due to the receipt and timing of large orders, the Company experiences some quarter to quarter fluctuation in unit sales.
How does the Female Health Company make money?
Female Health Company manufactures markets and sells the FC2 female condom. Its product provides dual protection against unintended pregnancy and sexually transmitted infections, including HIV/AIDS.
Who is running the business and what is their background?
Karen L. King
Ms. Karen L. King serves as President, Chief Executive Officer of the Company, effective January 20, 2014.
Previously, Ms. King served as President of the Biologics and Bio-Solutions businesses of Royal DSM, a global provider of biopharmaceutical manufacturing technology and services, from September 2006 to September 2013.
Ms. King served as Executive Vice President of the Company from May 2006 to September 2006 and as Vice President, Global Development from August 2004 to May 2006, where she was responsible for sales, marketing, and business development.
Prior to August 2004, Ms. King worked at Baxter International since 1981, most recently serving as President of Pulse Nutrition Solutions, Inc., a subsidiary of Baxter that developed a line of nutritional products for consumer use.
Ms. Michele Greco serves as Chief Financial Officer, Vice President of The Female Health Company. Ms. Greco is a CPA with nearly 30 years of experience in public accounting with Ernst & Young LLP.
From January 2011 to February 2012, Ms. Greco provided consulting services to Systems Research Incorporated as a recruiter of finance professionals.
From March 2009 to January 2011, Ms. Greco was involved in a series of personal business ventures.
From 1994 to March 2009, Ms. Greco served as an audit partner with Ernst & Young LLP. Ms. Greco joined Ernst & Young LLP in 1981.
A current asset is 4 times bigger than its current liabilities while quick ratio 2.8. FHCO has no short-term and long-term debt.
Female Health Company Cash Flow From Operating Activities
Operating cash flow of FHCO shows positive results in the past five years from 2009 to 2013 with an average of 7. The company has funds available to retire additional debts and invest new line of business. FHCO’s cash outflow from investing was bigger than cash inflow or they are using the capital to invest in the company. Financing cash flow 2009 to 2013 was also negative; their company is repaying its debts.
Female Health Company Free Cash Flow
Free cash flow balances were all positive which means that the company is still capable of possible expansion thru investing to other companies.
The Female Health Company Valuation
In our valuation of equity, we adopt the investment styles which we think applicable to the company. One valuation style is that seeks out undervalued companies whose stock prices are temporarily down, but whose fundamentals are sound in the long run. The philosophy was to buy stocks when prices fall and to sell when the price rises a great deal.
Using the formula “Sustainable growth rate=ROE x (1- dividend payout ratio)”, it shows that the average SGR of FHCO was 20.71 percent. This is the measure of how fast a company can grow.
Going forward, the margin of safety shows that the margin of safety was averaging 73 percent. Using a margin of safety, one should buy a stock when it is worth more than its market price. Further, the margin of safety protects the investor from both poor decisions and downturns in the market. The Margin of Safety requires knowing when the buying price is low in absolute terms, rather than merely relative to the market as a whole. This formula is used to identify the difference between company value and price, in other words, it is the difference between the real value of the stock and the market price. The result shows that it passed the 40 percent requirement and therefore, it is a good candidate for a Buy.
Female Health Company Relative Valuation Method
With this valuation method, is to compare the market values of the stock with the fundamentals (earnings, book value, growth multiples, cash, flow, and the metrics) of the stock.
FHCO’s current book value per share was $1.09, with an average of $.77 per share, on the other hand, the price to earnings ratio in the trailing twelve months (ttm) was 11.9% per share and 19.02% average per share. Moreover, the earnings per share at ttm was $.33 and averaging $.34 while the return on equity at ttm was $34.43 and has an average of $ 49.47 per share.
The table below shows the summary of calculations of FHCO
The growth was 24 percent, while the dividend yield was 7.41 percent. Likewise, the calculated value of appreciation is $1.22 which is the required 40 percent. Further, the computed value dividend was .28 and the computed total value was $ 3.70. The price that the investor is willing to pay was $3.70. Furthermore, the market price of FHCO to date was $ 3.95 per share. Overall, if we compare this to the total value of $ 3.70 per share, it indicates that the stock is trading at undervalued prices.
Overall, it shows that FHCO is financially healthy based on its current resources. Further, the company has sufficient cash flow used for operating activities and high free cash flow. Furthermore, the margin of safety of 73 percent has passed the 40 percent requirement.
Researched and Written by Rio
Edited by Cris