Viatris may be undervalued with strong growth indicators, but the 11 analysts following the company give it an rating of hold. Their target prices range from $10.0 to $35.0 per share, for an average of $14.28. At today's price of $9.7, Viatris is trading -32.07% away from its average target price, suggesting there is an analyst consensus of strong upside potential for the stock.
Viatris Inc. operates as a healthcare company worldwide. Based in Canonsburg, PA, the large-cap Health Care company has 38,000 full time employees. Viatris has provided a 4.9% dividend yield over the last 12 months.
Viatris has a trailing twelve month P/E ratio of 6.1, compared to an average of 24.45 for the Health Care sector. Considering its EPS guidance of $2.88, the company has a forward P/E ratio of 3.4.
The average compound growth rate of the company's historical and projected earnings per share is 149.1%. On this basis, the company's PEG ratio is 0.04. However, this growth rate is probably not sustainable. In its place we will use the broader market's estimated 5-year EPS growth rate of 11.8%, which gives us a PEG ratio of 0.51. Even with this more conservative assumption on EPS growth, the PEG ratio suggests that Viatris shares are underpriced.
Furthermore, the market is potentially undervaluing Viatris in terms of its book value because its P/B ratio is 0.56. In comparison, the sector average P/B ratio is 4.16. The company's shares are currently -61.1% below their Graham number, indicating that its shares have a margin of safety.
Why would analysts be giving such an undervalued stock a bad rating? It's possible that analysts are looking beyond common valuation metrics and taking into account the company's potentially irresponsible use of debt to operate its business. Furthermore, Viatris has slim margins as you can see in the financial summary below.
| 2019-12-31 | 2020-12-31 | 2021-12-31 | 2022-12-31 | |
|---|---|---|---|---|
| Revenue (MM) | $11,500 | $11,946 | $17,886 | $16,263 |
| Gross Margins | 33.9% | 31.8% | 31.2% | 40.0% |
| Operating Margins | 6.0% | -0.9% | 1.6% | 10.2% |
| Net Margins | 0.15% | -5.61% | -7.1% | 12.78% |
| Net Income (MM) | $17 | -$670 | -$1,269 | $2,079 |
| Net Interest Expense (MM) | -517 | -498 | -636 | -592 |
| Net Interest Expense (MM) | -$517 | -$498 | -$636 | -$592 |
| Depreciation & Amort. (MM) | -$2,019 | -$2,216 | -$4,506 | -$3,028 |
| Earnings Per Share | $0.03 | -$1.11 | -$1.05 | $1.58 |
| EPS Growth | n/a | -3800.0% | 5.41% | 250.48% |
| Diluted Shares (MM) | 516 | 601 | 1,209 | 1,199 |
| Free Cash Flow (MM) | $1,398 | $551 | $2,508 | $2,510 |
| Capital Expenditures (MM) | -$406 | -$681 | -$509 | -$443 |
| Net Current Assets (MM) | -$12,614 | -$25,731 | -$23,447 | -$18,314 |
| Current Ratio | 1.21 | 1.22 | 1.1 | 1.58 |
| Long Term Debt (MM) | $11,214 | $22,429 | $19,717 | $18,015 |
| Net Debt / EBITDA | 4.55 | 12.56 | 4.67 | 2.8 |
