Outlook of Vertex
Vertex Pharmaceuticals (VRTX) has outperformed other stocks within the Health Care Select Sector SPDR ETF (XLV) with a return of 6.92% for the period between August 25 and August 31. The company outperformed other stocks like Celgene (CELG), Gilead Sciences (GILD), and Amgen (AMGN), which returned 4.15%, 4.39%, and 2.80%, respectively, for the same period. However, the stock is still trading below its 20-day, 50-day, and 100-day moving averages. In this part, we will look at how the stock has performed up until the end of August.
The above graph reflects the performance of VRTX and XLV on a month-over-month basis. VRTX has been more volatile compared to XLV. Out of the eight months in 2015 so far, VRTX has outperformed XLV in five of those months. As of August 31, 2015, Vertex has given year-to-date returns of 6.29%, while XLV has returned 2.59%. Vertex has been trading close to the lower Bollinger band price of $122 and is close to moving into the oversold territory.
Valuations of Vertex
The average price-to-book value (or PVB) of the biotechnology sector was at 12.76x. The average PVB of XLV is 5.77x. Vertex’s PVB was at 34.28x, which is above the industry average and indicates that the stock is overvalued. However, VRTX has a strong cash position of ~$1 billion in cash, cash equivalents, and marketable securities as per the second quarter report.