Is Vertex Pharmaceuticals Inc (VRTX) overvalued?
On Equity Rank's model estimate, VRTX trades 20% above its fair value. Vertex Pharmaceuticals Inc (VRTX) last closed at $547.09; the multi-method model fair value is $457.84.
| Price | Model fair value | Price vs model |
|---|---|---|
| $547.09 | $457.84 | 20% above |
What the answer rests on
- 1 of 8 valuation methods put VRTX's value above its price and 7 put it below, so the methods mostly agree.
- To justify today's price, VRTX's free cash flow would need to grow about 8.0% a year for ten years (a reverse discounted cash flow). Over the last three years it actually grew -6.6% a year.
- VRTX trades at 35.3 times its last year's earnings, against a median of 19.7 for 24 profitable Biotechnology companies.
- Over the past year the price sat below the model fair value on 14% of trading days. The gap ranged from 12% below to 25% above the model fair value.
Read this before relying on it
The model fair value is an estimate from published financial statements. It is not a forecast of where the price goes, and it can be wrong. Within 10% either side we call it close to fair value: valuation models are not precise enough to read more into a smaller gap. Our own lists have no proven edge over the market yet; the live record shows every result, misses included.
Every valuation method behind VRTX's fair value · What prices assume · Other companies