VRTX Dips 16% In One Month, Should You Buy The Stock?

We believe there is not much to fear in VRTX stock given its overall Strong operating performance and financial condition. This is aligned with the stock’s High valuation because of which we think it is Fairly Priced. Here is our multi-factor assessment.

But no matter how attractive, investing in a single stock carries high risk. Trefis High Quality Portfolio and is designed to reduce stock-specific risk while giving upside exposure

Let’s get into details of each of the assessed factors but before that, for quick background: With $99 Bil in market cap, Vertex Pharmaceuticals provides therapies for cystic fibrosis patients with F508del mutation and develops treatments like VX-864 for AAT deficiency, currently in Phase 2 clinical trials.

[1] Valuation Looks High

This table highlights how VRTX is valued vs broader market. For more details see: VRTX Valuation Ratios

[2] Growth Is Strong

• Vertex Pharmaceuticals has seen its top line grow at an average rate of 11.0% over the last 3 years
• Its revenues have grown 10% from $10 Bil to $11 Bil in the last 12 months
• Also, its quarterly revenues grew 12.1% to $3.0 Bil in the most recent quarter from $2.6 Bil a year ago.

This table highlights how VRTX is growing vs broader market. For more details see: VRTX Revenue Comparison

[3] Profitability Appears Moderate

• VRTX last 12 month operating income was $-199 Mil representing operating margin of -1.7%
• With cash flow margin of 33.7%, it generated nearly $3.8 Bil in operating cash flow over this period
• For the same period, VRTX generated nearly $3.6 Bil in net income, suggesting net margin of about 31.9%

This table highlights how VRTX profitability vs broader market. For more details see: VRTX Operating Income Comparison

[4] Financial Stability Looks Very Strong

• VRTX Debt was $1.5 Bil at the end of the most recent quarter, while its current Market Cap is $99 Bil. This implies Debt-to-Equity Ratio of 1.5%
• VRTX Cash (including cash equivalents) makes up $6.4 Bil of $24 Bil in total Assets. This yields a Cash-to-Assets Ratio of 26.6%

[4] Downturn Resilience Is Moderate

VRTX saw an impact slightly better than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• VRTX stock fell 26.6% from a high of $241.31 on 25 January 2021 to $177.01 on 5 October 2021 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 28 January 2022
• Since then, the stock increased to a high of $516.74 on 10 November 2024 , and currently trades at $387.18

 
2020 Covid Pandemic

• VRTX stock fell 31.7% from a high of $303.10 on 20 July 2020 to $207.01 on 29 October 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 15 August 2022

 
2008 Global Financial Crisis

• VRTX stock fell 64.0% from a high of $40.56 on 12 September 2007 to $14.59 on 10 March 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 10 November 2009

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read VRTX Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.