Summary
- 47.6% single-year revenue increase on the guidance of an additional 15% sales growth in 2021.
- 67% capital gains YoY with a 4% downside risk in the same period.
- Unique and pioneering cystic fibrosis drug Trikafta posting $420 million in 2019 Q4 sales alone.
- P/Sales of $15.58, high P/E, and FWD PEG of 1.47x highlighting market expectations.
- Exciting point of entry in light of growth estimates and valuation, advocating for a medium-term holding period.
Vertex (VRTX), the inventor of the new cystic fibrosis wonder drug Trikafta, is a shining star amongst biotech and pharmaceuticals for 2020. On a background of strong fundamentals, with forecasted EBITDA growth of 51.29% in the coming year just to name a few, investors have demonstrated an expectation of extraordinary results into the coming periods. Thus, a compelling investment case is made for medium-term players to capture fantastic returns over the next multiple periods, which is summarised below.
Profitability
The company has delivered CAGR revenue of 33.65% over the previous 3 years and a mammoth 47.60% revenue growth in the single-year period to date, on a gross margin of 48.57%. The latter figure arose largely on the back of Trikafta's approval in the USA back in 2019 which generated $420 million in sales in Q4 2019 and shall continue to accelerate earnings into 2020/2021, with revenue guidance of ~15% or $6.62 billion estimated in 2021.
Data Source: Vertex 10-K Filing 2019; 2018; 2017; 2016; 2015
Such growth in revenues and earnings positions the company exceptionally well from a solvency and operations perspective. As such, the company has no long-term debt on the balance sheet and will continue to meet its short-term obligations as they fall due moving forward, with a current ratio of 3.27x, which also demonstrates that every 1 dollar of short-term liabilities is covered by $3.27 in current assets.
