Vertex (VRTX) Hits Fresh High: Is There Still Room to Run?

Have you been paying attention to shares of Vertex Pharmaceuticals (VRTX)? Shares have been on the move with the stock up 3.9% over the past month. The stock hit a new 52-week high of $186.44 in the previous session. Vertex Pharmaceuticals has gained 23.3% since the start of the year compared to the 7.7% move for the Zacks Medical sector and the 1.3% 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 July 25, 2018, Vertex reported EPS of $0.94 versus consensus estimate of $0.72.

For the current fiscal year, Vertex is expected to post earnings of $3.74 per share on $2.99 billion in revenues. This represents a 91.79% change in EPS on a 32.68% change in revenues. For the next fiscal year, the company is expected to earn $4.59 per share on $3.51 billion in revenues. This represents a year-over-year change of 22.71% and 17.31%, respectively.

Valuation Metrics

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 is due for a pullback from this level.

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. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Vertex has a Value Score of D. 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 49.4X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 176.3X versus its peer group's average of 23.5X. Additionally, the stock has a PEG ratio of 1.25. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Vertex currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

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 meets the list of requirements. Thus, it seems as though Vertex shares could have potential in the weeks and months to come.

How Does Vertex Stack Up to the Competition?

Shares of Vertex have been soaring, 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 looking good, including Aerpio Pharmaceuticals (ARPO), Krystal Biotech (KRYS), and Celgene (CELG), 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 38% 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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Vertex Pharmaceuticals Incorporated (VRTX): Free Stock Analysis Report

Celgene Corporation (CELG): Free Stock Analysis Report

Krystal Biotech, Inc. (KRYS): Free Stock Analysis Report

Aerpio Pharmaceuticals, Inc. (ARPO): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.