Shares of Vertex Pharmaceuticals (VRTX) have been strong performers lately, with the stock up 11% over the past month. The stock hit a new 52-week high of $299.21 in the previous session. Vertex Pharmaceuticals has gained 35.1% since the start of the year compared to the 0.2% move for the Zacks Medical sector and the 13.6% return for the Zacks Medical - Biomedical and Genetics industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on April 29, 2020, Vertex reported EPS of $2.56 versus consensus estimate of $1.83.
For the current fiscal year, Vertex is expected to post earnings of $8.91 per share on $5.71 billion in revenues. This represents a 67.17% change in EPS on a 37.08% change in revenues. For the next fiscal year, the company is expected to earn $10.37 per share on $6.36 billion in revenues. This represents a year-over-year change of 16.4% and 11.39%, respectively.
Vertex may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Vertex has a Value Score of C. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 33.2X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 62.1X versus its peer group's average of 15.8X. Additionally, the stock has a PEG ratio of 1.17. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Vertex currently has a Zacks Rank of #1 (Strong Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Vertex fits the bill. Thus, it seems as though Vertex shares could have a bit more room to run in the near term.
How Does Vertex Stack Up to the Competition?
Shares of Vertex have been rising, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also impressive, including MorphoSys AG Unsponsored (MOR), Gilead Sciences (GILD), and Emergent Biosolutions (EBS), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
The Zacks Industry Rank is in the top 20% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Vertex, even beyond its own solid fundamental situation.
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Vertex Pharmaceuticals Incorporated (VRTX) : Free Stock Analysis Report
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