Has Vertex Pharmaceuticals Become More Attractive After Positive Cystic Fibrosis Data in 2025?

If you are on the fence about what to do with Vertex Pharmaceuticals stock right now, you are certainly not alone. This is one of those healthcare names that always seems to prompt tough questions. Is it an opportunity after the recent pullback, or is it more of a wait-and-see? Vertex has bounced around in 2024, with the stock up just 0.7% over the past week, drifting slightly lower over the past month and year to date, but holding on to substantial gains over three and five years. Put simply, the narrative is shifting, and that is drawing some fresh attention from investors trying to understand whether the risk-reward has changed.

A big part of that conversation is Vertex’s value score. Across six commonly used measures of valuation, Vertex is currently flashing as undervalued in five out of six, giving it a valuation score of 5. On paper, that certainly paints a bullish picture. But, as anyone who has owned healthcare stocks knows, the numbers often only tell part of the story, especially in a sector moved by new drug approvals, R&D progress, and shifting market conditions.

So, how do all these valuation approaches stack up for Vertex? Could there be an even better way to judge whether the current price is attractive for new or existing investors? Let’s take a closer look at the major valuation checks, before tackling one approach that goes beyond the typical spreadsheet analysis.

Why Vertex Pharmaceuticals is lagging behind its peers

Approach 1: Vertex Pharmaceuticals Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a classic valuation method that estimates a company’s worth by projecting its future cash flows and discounting them back to today’s value. In Vertex Pharmaceuticals’ case, this analysis uses a two-stage Free Cash Flow to Equity approach, taking into account both analyst forecasts and longer-term extrapolations.

Currently, Vertex generates a robust Free Cash Flow of $3.46 Billion annually. Analysts expect this figure to climb in the coming years, with future projections by 2029 suggesting Free Cash Flow could reach $6.64 Billion. The model builds out a total of ten years of Free Cash Flow estimates. The first half is grounded in analyst consensus, while the latter is based on methodical growth assumptions by Simply Wall St.

According to this DCF model, the estimated fair value per Vertex share is $714.65. This represents a significant 46.0% intrinsic discount to the current trading price, suggesting the stock may be meaningfully undervalued based on the present value of its expected future cash flows.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Vertex Pharmaceuticals.

Our Discounted Cash Flow (DCF) analysis suggests Vertex Pharmaceuticals is undervalued by 46.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Vertex Pharmaceuticals Price vs Earnings

The Price-to-Earnings (PE) ratio is one of the most widely used tools for valuing profitable companies like Vertex Pharmaceuticals. It helps investors gauge how much they are paying for each dollar of annual earnings, offering a direct line of sight into the market’s expectations for growth and risk.

In general, companies with higher expected earnings growth or lower business risk tend to command higher PE ratios. By contrast, riskier or slower-growing firms usually trade at a discount. This context is essential when interpreting current valuations.

As of now, Vertex trades at a PE ratio of 27.19x. This is above the Biotechs industry average of 16.32x but below the peer group average of 40.51x. However, these simple benchmarks do not tell the full story, especially as they often fail to capture differences in profitability, growth profiles, and risk exposures.

This is where Simply Wall St’s proprietary “Fair Ratio” comes in. The Fair Ratio for Vertex is 28.28x. This represents the multiple the stock should deserve factoring in the company’s growth outlook, profit margins, risk, size, and industry background. By tailoring the expected PE to Vertex’s unique profile, the Fair Ratio is a more nuanced benchmark than peer or industry comparisons alone.

With Vertex’s current PE of 27.19x sitting just slightly below its Fair Ratio of 28.28x, the stock’s valuation by earnings is right in line with where it should be, considering its fundamentals and outlook.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Vertex Pharmaceuticals Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. Narratives let investors connect a company’s story with its financial numbers by combining personal perspectives on business catalysts, future revenue and margins, and fair value targets all in one place. Rather than just rely on ratios or models, Narratives bring the “why” behind the numbers by linking real trends and company developments to forecasts and then to a fair value judgment.

On Simply Wall St’s Community page, millions of investors can easily create, explore, and update their own Narratives for any stock, including Vertex Pharmaceuticals. Narratives help you decide when to buy or sell by comparing your fair value estimate to the current market price and seeing how it stacks up against other investors’ views. Plus, Narratives update dynamically as soon as new information hits, like earnings releases or major news, so your thesis can stay relevant without endless spreadsheet tweaks.

For example, the most optimistic Narrative for Vertex expects a fair value of $616 per share, supported by above-average growth in gene editing and pipeline diversity, while the most cautious Narrative sees just $330 per share, focused on revenue concentration and regulatory risks.

Do you think there's more to the story for Vertex Pharmaceuticals? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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