Do It Yourself Stock Investor
Swift FCF Yield

Condoms Plus Biotech Produce Free Cash Flow Yield

| by

Veru chart showing rise of price per share

Veru, Inc. (NASDAQ: VERU) is a health care company slightly in the balance as the GOP continues attempts to shrink the health care bill. Yet, their main product selling now is the female condom known as FC2. This product has shown to be covered in family planning in a majority of states and independent from federal funding initiatives. Since the late 2016 merger, the condom business was joined to a biotech company pushing it's pipeline of urology drugs into development.

One of the first changes made to the female condom was defunding the shelf displays for general consumer purchases. It had to be done, but was alarming to long time shareholders. It boiled down to the slim margins on return of investment. It's hard to put a competing condom on the shelves when the others are ran by giant conglomerates. The parent company of Durex Condoms is Reckitt Benckiser Group. They trade at $6,785 British pounds per share for a market capital of about $47.83 billion pounds. Church & Dwight Co., Inc. (NYSE: CHD) own Trojan Condoms. They have a market capital that hovers in the area of $12 billion U.S. Compare those figures to that of Veru, Inc., which has only $133 million in market capital and you can appreciate why they no longer fight that losing fight.

The new sells focus on the FC2 condom is prescription, which is better for explaining how the prophylactic works and allows more privacy in the transaction then walking into a grocery store. What some have failed to realize is the amount of conventional condoms already being dispersed in the same way; the model works. On September 26th, Veru, Inc. launched its telemedicine purchase option. This allows "women and men better access to FC2 by being able to obtain a prescription online for the FC2 female condom."

The added sector to the company is it's developing medicines. Some are on fast track to release as they are modifications or improvements to preexisting medicines. Others are scheduled as the time and funding permits at a later date. See slide 5 of Veru, Inc. presentation below.

Veru pipeline

For more information about urology medicines and Tamsulosin in particular, read and listen to the author's interview with Veru's CEO, Dr. Mitchell Steiner.

Viveve Medical Inc (NASDAQ:VIVE) is often grouped into the same business sector of Veru, Inc. They primarily focus upon vaginal repair and pelvic floor strength that can mitigate incontinence from injury and child birth. This company is advancing treatments and products to FDA reviews and managing a patent portfolio. In contrast they do not branch off into the medicine pipelines like Veru, Inc. does. Viveve Medical, Inc. has a market capital similar to Veru, both being micro-cap stocks.

The Swift Free Cash Flow (FCF) Yield

Veru, Inc.'s Q3 financial statement has posted with their off-setting fiscal year. In 2016 they were a cash flow negative company. It was back in 2014 when they had $3.5m in FCF. At this present quarter they have finally returned to cash flow positive. They had nearly a half million in Operating Cash Flow (OCF) and only $0.12m in CapEx. The FCF Yield is approximately 0.22% (Market Capital). The yield in relation to Enterprise Value is 0.60%. This yield is low and can be partially explained by the market anticipating future revenues substantially increasing and the recent bull run on price per share nearly up 200%.

Veru, Inc. FCF Yield Chart with Comps

Free Cash Flow is obtained by taking the value of the company's operating cash flow and subtracting from it the value of capital expenses. The yield is then formulated by dividing the result by either the market capital or enterprise value.


Disclosure: I/we own shares in VERU. I/we have no positions in VIVE or CHD, and no plans to initiate any positions within the next 72 hours.

Visit DIY Stock Investor, the finance site regarding stock analysis. Follow DIYSI's founder and 4.5-star TipRanks expert, Travis Brown.