Should You Buy Vertex Pharmaceuticals Stock At $510?
Vertex Pharmaceuticals (NASDAQ:VRTX) stock has surged by 27% year-to-date, a stark contrast to the S&P 500’s 4% decline. This surge follows the FDA’s approval last month of Journavx, a non-opioid oral pain reliever, which analysts predict could generate $4 billion in peak annual revenue. The drug’s lack of addictive properties is expected to make it a preferred choice for medical professionals.
At its current levels of $510, VRTX stock looks attractive but volatile — making it a tricky pick to buy. We believe there is minimal cause for concern with VRTX stock, which makes it attractive but highly sensitive to adverse events, as its current valuation is very high.
We arrive at our conclusion by comparing the current valuation of VRTX stock with its operating performance over the recent years, as well as its current and historical financial condition. Our analysis of Vertex Pharmaceuticals along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a very strong operating performance and financial condition, as detailed below.
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How Does Vertex Pharmaceuticals’ Valuation Look vs. The S&P 500?
Going by what you pay per dollar of sales or profit, VRTX stock looks expensive compared to the broader market.
• Vertex Pharmaceuticals has a price-to-sales (P/S) ratio of 11.2 vs. a figure of 3.2 for the S&P 500
• Additionally, the company’s price-to-operating income (P/EBIT) ratio is 28.1 compared to 24.3 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of -250.6 vs. the benchmark’s 24.3
How Have Vertex Pharmaceuticals’ Revenues Grown Over Recent Years?
Vertex Pharmaceuticals’ Revenues have seen notable growth over recent years.
• Vertex Pharmaceuticals has seen its top line grow at an average rate of 13.4% over the last 3 years (vs. increase of 6.3% for S&P 500)
• Its revenues have grown 11.7% from $9.9 Bil to $11 Bil in the last 12 months (vs. growth of 5.2% for S&P 500)
• Also, its quarterly revenues grew 15.7% to $2.9 Bil in the most recent quarter from $2.5 Bil a year ago (vs. 5.0% improvement for S&P 500)
How Profitable Is Vertex Pharmaceuticals?
Vertex Pharmaceuticals’ profit margins are worse than most companies in the Trefis coverage universe.
• Vertex Pharmaceuticals’ Operating Income over the last four quarters was $4.4 Bil, which represents a high Operating Margin of 39.9% (vs. 13.0% for S&P 500)
• Vertex Pharmaceuticals’ Operating Cash Flow (OCF) over this period was $-493 Mil, pointing to a very poor OCF-to-Sales Ratio of -4.5% (vs. 15.7% for S&P 500)
Does Vertex Pharmaceuticals Look Financially Stable?
Vertex Pharmaceuticals’ balance sheet looks very strong.
• Vertex Pharmaceuticals’ Debt figure was $1.7 Bil at the end of the most recent quarter, while its market capitalization is $132 Bil (as of 3/19/2025). This implies a very strong Debt-to-Equity Ratio of 1.4% (vs. 19.0% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $6.1 Bil of the $23 Bil in Total Assets for Vertex Pharmaceuticals. This yields a strong Cash-to-Assets Ratio of 27.1% (vs. 14.8% for S&P 500)
How Resilient Is VRTX Stock During A Downturn?
VRTX stock has been more resilient than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on VRTX stock? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
• VRTX stock fell 11.1% from a high of $321.48 on 22 November 2022 to $285.76 on 28 December 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 31 January 2023
• Since then, the stock has increased to a high of $516.74 on 10 November 2024 and currently trades at around $510
COVID-19 Pandemic (2020)
• VRTX stock fell 19.4% from a high of $247.78 on 19 February 2020 to $199.77 on 16 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 6 April 2020
Global Financial Crisis (2008)
• VRTX stock fell 59.9% from a high of $36.35 on 10 October 2007 to $14.59 on 10 March 2008, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 3 August 2009
Putting All The Pieces Together: What It Means For VRTX Stock
In summary, Vertex Pharmaceuticals’ performance across the parameters detailed above are as follows:
• Growth: Very Strong
• Profitability: Weak
• Financial Stability: Extremely Strong
• Downturn Resilience: Very Strong
• Overall: Very Strong
Hence, despite its very high valuation, the stock appears attractive but volatile, which supports our conclusion that VRTX is a tricky stock to buy.
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