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Why Most Analysts Are Bullish on Vertex Pharmaceuticals

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Operational performance

Vertex Pharmaceuticals (VRTX) is expected to incur selling, general, and administrative expenses of $117.10 million in Q2 2018 as compared with $92.91 million in Q2 2017, an increase of 26.04%. Similarly, the company’s research and development expenses are expected to increase by 24.52% from $240.46 million in Q2 2017 to $299.43 million in Q2 2018. The total operating expenses incurred by Vertex Pharmaceuticals are expected to increase by 44.36% from $333.37 million in Q2 2017 to $481.24 million in Q2 2018.

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Bottom line

Vertex Pharmaceuticals is expected to report net income of $106.51 million in Q2 2018 as compared to net income of $18 million in Q2 2017, which is more than a fivefold increase. This estimate translates into net income per share of $0.45 for Q2 2018 as compared with net income per share of $0.07 for Q2 2017.

Analysts’ recommendations

19 of the total 23 analysts covering Vertex Pharmaceuticals in July 2018 have given the stock a “buy” or a higher rating, while four analysts have given it a “hold” rating. The mean rating for Vertex is 1.83 with a target price of $191.76, which implies an upside potential of 8.1% for the stock.

In comparison, peers Celgene (CELG), Gilead Sciences (GILD), and Bristol-Myers Squibb (BMY) have mean analyst ratings of 2.25, 2.07, and 2.55, respectively, and target prices of $112.54, $86, and $57.56, respectively.

Price performance

From $150 on January 2, 2018, Vertex stock rose to $178.15 on March 12. Since then, the stock gradually corrected to $144.14 on June 5 and climbed back to its current levels of $180 in July.

Currently, Vertex Pharmaceuticals trades at a forward price-to-earnings multiple of 38.07x. Its price-to-sales ratio and price-to-book ratio are 18.72 and 18.83, respectively. The return on equity generated by the company stands at 3.4%.

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