Vertex Pharmaceuticals (VRTX) shares are up more than 27% over the past three months, after earnings rebounded from a 2021 second-quarter slump, created by higher research and development costs for certain collaborations.
The company’s fundamentals appear to be solid, as sales and earnings are growing on continued strong progress in the company’s business. So, I’m bullish on this stock.
Vertex Pharmaceuticals is a biotechnology developer of treatments for patients affected with cystic fibrosis (CF), an inherited disease that causes severe damage to the respiratory, digestive tract and other organs.
The company markets Kaftrio in Europe and other non-U.S. countries, and Trikafta in the U.S. While the first product can be used in CF patients from 5 years of age, the second is intended for CF patients over 11 years of age.
The pipeline includes treatments in development for various genetic disorders that cause lung disease, as well as for severe kidney disease. Vertex is also working on treatments for diabetes, hereditary red blood cell disorders and leukemia.
Q4 2021 Results
As a result of strong performance in CF treatment sales, Vertex Pharmaceuticals delivered pro forma earnings per share of $3.37 (up 34.3% year-on-year) on revenues of $2.07 billion (up 27.4% year-on-year).
Pro forma earnings beat the median consensus estimate by $0.08, while revenue beat the analysts’ median forecast by $60 million.
Financial Condition
The company stands on solid financial pillars. As of December 31, 2021, cash and short-term investments were $7.52 billion, nearly eight times the total debt of $967.4 million. In addition, the Interest Coverage Ratio of 42.3 indicates that the company has no difficulty paying the interest cost on the entire debt. And the current ratio of 4.46 says short-term commitments are being met on time.
Outlook
The outlook is bright, as the treatment of CF is expected to generate more revenue as the number of adult patients worldwide increases, according to several available statistics.
That forecast should already translate to annual revenue growth of 10.5% or more, to as much as $8.4 billion this year. This should potentially drive the stock price significantly higher from current levels.
With several programs in the final stages of development, the company’s products are poised to serve more patients and drive increased sales and profits this year and beyond. This will have a long-term positive effect on the share price.
Wall Street’s Take
Over the past three months, nineteen Wall Street analysts have issued a 12-month price target for VRTX. The company has a Moderate Buy consensus rating, based on twelve Buy, five Hold, and two Sell ratings.
The average Vertex Pharmaceuticals (VRTX) price target is $263.06, implying a 14.22% upside potential.
Conclusion
Shares continue to trade higher as profitability improves. The stock has short- and long-term catalysts for higher market valuations. The balance sheet is solid and can support the company’s growth plans for many years to come.
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