Vertex Pharmaceuticals Incorporated (VRTX) Stock Analysis — Fair Value, Risk & Moat Rating
NMS · Healthcare · Biotechnology
Is Vertex Pharmaceuticals Incorporated a safe investment right now?
Vertex Pharmaceuticals Incorporated's Altman Z-Score of 12.86 places it in the safe zone. Our DCF model estimates intrinsic value at $411.54, suggesting the stock is overvalued by 7%. Moat rating: 2.3/5 stars.
Could Vertex Pharmaceuticals Incorporated go bankrupt? Altman Z-Score analysis
Z-Score of 12.86 is above 3.0, indicating the company is financially healthy by this metric.
- Below 1.8 — Distress Zone (high bankruptcy risk)
- 1.8 to 3.0 — Gray Zone (elevated uncertainty)
- Above 3.0 — Safe Zone (financially healthy)
What drives VRTX's Z-Score?
| Component | Formula | Value | Weight | Contribution |
|---|---|---|---|---|
| A · Working Capital / Total Assets | WC / TA | 0.2677 | 1.2 | 0.32 |
| B · Retained Earnings / Total Assets | RE / TA | 0.4263 | 1.4 | 0.6 |
| C · EBIT / Total Assets | EBIT / TA | 0.1701 | 3.3 | 0.56 |
| D · Market Cap / Total Liabilities | MCap / TL | 18.2425 | 0.6 | 10.95 |
| E · Revenue / Total Assets | Rev / TA | 0.438 | 1.0 | 0.44 |
How has VRTX's financial health changed over time?
| Year | Z-Score | Zone |
|---|---|---|
| 2016 | 44.28 | Safe |
| 2017 | 40.31 | Safe |
| 2018 | 43.66 | Safe |
| 2019 | 37.33 | Safe |
| 2020 | 30.82 | Safe |
| 2021 | 23.3 | Safe |
| 2022 | 22.27 | Safe |
| 2023 | 17.93 | Safe |
| 2024 | 15.22 | Safe |
| 2025 | 12.86 | Safe |
Source: Calculated from VRTX's latest 10-K filing on SEC EDGAR.
What is Vertex Pharmaceuticals Incorporated actually worth?
Fair value range: $240.53 — $482.63
Valuation Methods
| Method | Fair Value | Weight | Detail |
|---|---|---|---|
| Historical PE × Forward EPS | $437.30 | 50% | 24.4x avg PE (3 years) × $17.92 forward EPS |
| DCF (Discounted Cash Flow) | $482.63 | 30% | Two-stage DCF: $2.6B TTM FCF, 13.0% growth, 7.0% WACC |
| EV/FCF Multiple | $240.53 | 20% | TTM FCF × 22x multiple + net cash |
Assumptions & Data Sources
| Parameter | Value | Source |
|---|---|---|
| FCF Growth Rate (Stage 1) | 13.0% | 70% analyst consensus + 30% historical |
| Analyst EPS Growth (This Year) | 3.5% | Consensus (29 analysts) |
| Analyst EPS Growth (Next Year) | 14.5% | Consensus |
| Historical 5Y FCF CAGR | 22.3% | SEC EDGAR |
| Terminal Growth Rate | 2.5% | Long-term GDP proxy |
| Discount Rate (WACC) | 7.0% | CAPM (Rf=4.3% + 0.5*5.5%) |
| Net Cash / (Debt) | $4,572M | Balance sheet |
| Base FCF (TTM) | $2.6B | Trailing 12 months |
| Shares Outstanding | 254,359,735 | Latest |
Sensitivity Analysis
| Growth Rate | 8% WACC | 10% WACC | 7.0% WACC | 13% WACC |
|---|---|---|---|---|
| 0% | $162.85 | $120.34 | $198.21 | $86.83 |
| 2.5% | $188.53 | $138.25 | $230.42 | $98.75 |
| 5.0% | $217.99 | $158.72 | $267.46 | $112.29 |
| 7.5% | $258.19 | $186.19 | $318.42 | $130.06 |
Free Cash Flow History
| Year | FCF | Growth |
|---|---|---|
| 2016 | $−0.6B | — |
| 2017 | $−0.4B | N/A |
| 2018 | $0.2B | N/A |
| 2019 | $0.7B | +315.2% |
| 2020 | $1.2B | +57.6% |
| 2021 | $1.5B | +27.2% |
| 2022 | $3.0B | +100.4% |
| 2023 | $2.4B | +-19.5% |
| 2024 | $3.9B | +63.0% |
| 2025 | $3.3B | +-15.0% |
Source: FCF data from SEC EDGAR filings. Price via Yahoo Finance.
Does Vertex Pharmaceuticals Incorporated have a durable competitive advantage?
Moat rating: 2.3/5.
What makes up VRTX's moat score?
ROIC Stability
ROIC variability over the past decade. Score: 2/5.
Gross Margin Trend
Gross margin trajectory over the past decade. Score: 3/5.
Switching Costs
Estimated customer lock-in based on margin level. Score: 2/5.
How stable is VRTX's return on invested capital?
| Year | ROIC | Trend |
|---|---|---|
| 2016 | -34.8% | — |
| 2017 | -22.2% | Rising |
| 2018 | 0.4% | Rising |
| 2019 | 2.4% | Rising |
| 2020 | 9.1% | Rising |
| 2021 | 12.1% | Rising |
| 2022 | 25.3% | Rising |
| 2023 | 18.1% | Declining |
| 2024 | 22.4% | Rising |
| 2025 | 20.2% | Declining |
Source: ROIC calculated from SEC EDGAR filings.
Is Vertex Pharmaceuticals Incorporated's dividend safe?
Vertex Pharmaceuticals Incorporated's key financial metrics
| Metric | Latest | 1Y Ago | 3Y Ago | Trend |
|---|---|---|---|---|
| Revenue | $9.9B | $8.9B | $6.2B | Rising |
| Net Income | $3.6B | $3.3B | $2.7B | Rising |
| Free Cash Flow | $3.3B | $3.9B | $3.0B | Rising |
Common questions about Vertex Pharmaceuticals Incorporated
Is Vertex Pharmaceuticals Incorporated at risk of going bankrupt?
Vertex Pharmaceuticals Incorporated's Altman Z-Score of 12.86 places it in the safe zone. This metric uses balance sheet ratios to predict bankruptcy probability within 2 years. A score below 1.8 signals distress, while above 3.0 indicates safety.
What is Vertex Pharmaceuticals Incorporated's intrinsic value based on DCF?
Our DCF model estimates Vertex Pharmaceuticals Incorporated's intrinsic value at $411.54 per share. The current margin of safety is -6.7%. This estimate is based on historical free cash flow trends and a risk-adjusted discount rate.
Does Vertex Pharmaceuticals Incorporated have a competitive moat?
Vertex Pharmaceuticals Incorporated receives a moat rating of 2.3 out of 5 stars, based on ROIC stability, gross margin trends, and estimated switching costs. A rating above 3.5 suggests a durable competitive advantage.
Does Vertex Pharmaceuticals Incorporated pay a dividend?
Vertex Pharmaceuticals Incorporated does not currently pay a regular dividend, or has suspended its dividend. Check the dividend safety section for the latest status.
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FairValueLabs Disclaimer
All valuations, scores, ratings, and classifications on this page are produced by the FairValueLabs internal valuation system. They do not represent actual market value, guaranteed outcomes, or professional investment advice. These are analytical estimates for educational and research purposes only.
This is not financial advice. All data is sourced from SEC EDGAR public filings. Always consult a qualified financial advisor before making investment decisions.
Last updated: Apr 20, 2026. Data sources: SEC EDGAR (financial statements), Yahoo Finance (market data, analyst consensus). Data may not reflect the most recent quarter.
VRTX analysis methodology: How we calculate fair value, Z-Scores, and moat ratings