Vertex Pharmaceuticals (VRTX) – A Summary of the Company

Vertex Pharmaceuticals shares fell by -2.1% Friday, and are now trading at a price of $424.68. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.

Vertex Pharmaceuticals's Valuation Is in Line With Its Sector Averages:

Vertex Pharmaceuticals Incorporated, a biotechnology company, engages in developing and commercializing therapies for treating cystic fibrosis (CF). The company belongs to the Technology sector, which has an average price to earnings (P/E) ratio of 35.0 and an average price to book (P/B) ratio of 7.92. In contrast, Vertex Pharmaceuticals has a trailing 12 month P/E ratio of 31.9 and a P/B ratio of 6.63.

Vertex Pharmaceuticals's PEG ratio is 2.43, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.

An Exceptionally Strong Balance Sheet:

2018 2019 2020 2021 2022 2023
Revenue (MM) $3,048 $4,163 $6,206 $7,574 $8,931 $9,654
Revenue Growth n/a 36.59% 49.08% 22.06% 17.91% 8.1%
Operating Margins 21% 28% 46% 37% 48% 40%
Net Margins 69% 28% 44% 31% 37% 36%
Net Income (MM) $2,097 $1,177 $2,712 $2,342 $3,322 $3,470
Net Interest Expense (MM) -$34 $59 $58 -$62 -$55 -$45
Depreciation & Amort. (MM) $72 $107 $110 $126 $148 $161
Earnings Per Share $8.09 $4.51 $10.29 $9.01 $12.82 $13.32
EPS Growth n/a -44.25% 128.16% -12.44% 42.29% 3.9%
Diluted Shares (MM) 260 262 263 260 259 261
Free Cash Flow (MM) $1,175 $1,494 $2,994 $2,408 $3,925 $4,205
Capital Expenditures (MM) $95 $75 $260 $235 $205 $176
Current Ratio 3.43 3.61 4.33 4.46 4.83 4.08

Vertex Pharmaceuticals benefits from rapidly growing revenues and increasing reinvestment in the business, strong operating margins with a positive growth rate, and generally positive cash flows. The company's financial statements show an excellent current ratio and positive EPS growth.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.

IN FOCUS