Today we're going to take a closer look at large-cap Health Care company Viatris, whose shares are currently trading at $10.09. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
The Market May Be Undervaluing Viatris's Assets and Equity:
Viatris Inc. operates as a healthcare company worldwide. The company belongs to the Health Care sector, which has an average price to earnings (P/E) ratio of 24.45 and an average price to book (P/B) ratio of 4.16. In contrast, Viatris has a trailing 12 month P/E ratio of 6.9 and a P/B ratio of 0.58.
When we divide Viatris's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -1.73. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.
The Business Has Weak Operating Margins:
| 2021-02-08 | 2022-02-28 | 2023-02-27 | |
|---|---|---|---|
| Revenue (MM) | $11,946 | $17,886 | $16,263 |
| Gross Margins | 32.0% | 31.0% | 40.0% |
| Operating Margins | -1% | 2% | 10% |
| Net Margins | -6.0% | -7.0% | 13.0% |
| Net Income (MM) | -$670 | -$1,269 | $2,079 |
| Net Interest Expense (MM) | -$498 | -$636 | -$592 |
| Depreciation & Amort. (MM) | -$2,216 | -$4,506 | -$3,028 |
| Earnings Per Share | -$1.11 | -$1.05 | $1.71 |
| EPS Growth | n/a | 5.41% | 262.86% |
| Diluted Shares (MM) | 601 | 1,213 | 1,217 |
| Free Cash Flow (MM) | $1,453 | $3,359 | $1,395 |
| Capital Expenditures (MM) | -$221 | -$342 | $1,558 |
| Net Current Assets (MM) | -$25,731 | -$23,447 | -$18,314 |
| Long Term Debt (MM) | $22,429 | $19,717 | $18,015 |
| Net Debt / EBITDA | 11.6 | 4.6 | 3.85 |
Viatris has slimmer gross margins than its peers, weak operating margins with a positive growth rate, and a highly leveraged balance sheet. On the other hand, the company has a strong EPS growth trend working in its favor. Furthermore, Viatris has weak revenue growth and a flat capital expenditure trend, irregular cash flows, and a decent current ratio.
