It's been a great morning session for Vertex Pharmaceuticals investors, who saw their shares rise 2.0% to a price of $489.73 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
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 Health Care sector, which has an average price to earnings (P/E) ratio of 27.61 and an average price to book (P/B) ratio of 3.69. In contrast, Vertex Pharmaceuticals has a trailing 12 month P/E ratio of -249.9 and a P/B ratio of 8.55.
Vertex Pharmaceuticals's PEG ratio is 121.97, 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.
Strong Revenue Growth and a Positive EPS Growth Rate:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $3,048 | $4,163 | $6,206 | $7,574 | $8,931 | $9,869 |
| Operating Margins | 21% | 28% | 46% | 37% | 48% | 39% |
| Net Margins | 69% | 28% | 44% | 31% | 37% | 37% |
| Net Income (M) | $2,097 | $1,177 | $2,712 | $2,342 | $3,322 | $3,620 |
| Net Interest Expense (M) | -$34 | $59 | $58 | -$62 | -$55 | -$44 |
| Depreciation & Amort. (M) | $72 | $107 | $110 | $126 | $148 | $181 |
| Diluted Shares (M) | 260 | 262 | 263 | 260 | 259 | 260 |
| Earnings Per Share | $8.09 | $4.51 | $10.29 | $9.01 | $12.82 | $13.89 |
| EPS Growth | n/a | -44.25% | 128.16% | -12.44% | 42.29% | 8.35% |
| Avg. Price | $167.4 | $184.74 | $251.55 | $204.43 | $253.99 | $489.73 |
| P/E Ratio | 20.32 | 40.34 | 24.09 | 22.49 | 19.58 | 34.86 |
| Free Cash Flow (M) | $1,175 | $1,494 | $2,994 | $2,408 | $3,925 | $3,337 |
| CAPEX (M) | $95 | $75 | $260 | $235 | $205 | $200 |
| Current Ratio | 3.43 | 3.61 | 4.33 | 4.46 | 4.83 | 3.99 |
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 of 3.99 and positive EPS growth.
