Assessing Viatris After Its Recent Share Price Rebound and Strategy Shift

• If you are wondering whether Viatris at around $11.93 is a hidden value play or a value trap, you are not alone. This article is about cutting through that noise.
• The stock has crept higher in the short term, up about 2.4% over the last week and 14.1% over the past month, even though it is roughly flat over 1 year and still down 3.9% year to date.
• Part of this renewed interest has come as investors refocus on Viatris’ strategic shift toward a more streamlined, branded and complex generics portfolio, along with ongoing debt reduction and portfolio pruning deals. At the same time, policy chatter around US drug pricing and the company’s efforts to simplify its global footprint have been nudging market expectations around both risk and long term cash flow stability.
• On our scorecard, Viatris earns a 5/6 valuation score, which strongly suggests undervaluation but also leaves room for nuance. Next, we will walk through the main valuation approaches investors use for this stock and then finish with a more holistic way to think about what it is really worth.

Find out why Viatris's 0.1% return over the last year is lagging behind its peers.

Approach 1: Viatris Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business is worth by projecting the cash it can generate in the future and then discounting those cash flows back to today in $ terms.

For Viatris, the 2 Stage Free Cash Flow to Equity model starts with last twelve month free cash flow of about $1.56 billion and uses analyst forecasts for the next few years, then extends those trends further out. By 2029, free cash flow is projected to be roughly $2.50 billion, with additional gradual growth assumed through 2035 as the company leans into branded and complex generics while managing its debt load.

When all those future cash flows are discounted back to today, the model arrives at an intrinsic value of about $49.78 per share. Compared with the recent share price around $11.93, the DCF implies the stock is roughly 76.0% undervalued. This indicates that the market is heavily discounting Viatris’ ability to sustain and grow cash flows.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Viatris is undervalued by 76.0%. Track this in your watchlist or portfolio, or discover 914 more undervalued stocks based on cash flows.

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

Approach 2: Viatris Price vs Sales

For companies like Viatris where revenue is relatively stable and earnings can be noisy due to restructuring, the price to sales multiple is a useful way to gauge what investors are paying for each dollar of current revenue.

In general, higher growth and lower perceived risk support a higher multiple, while slower growth or elevated risk warrant a lower one. Viatris currently trades on a price to sales multiple of about 1.0x, which is well below both the Pharmaceuticals industry average of roughly 4.33x and the peer group average of around 5.94x.

Simply Wall St also calculates a Fair Ratio of about 3.38x. This is its proprietary estimate of what Viatris’ price to sales multiple should be once you factor in its growth outlook, profitability profile, industry, market cap and specific risks. This tends to be more informative than a simple comparison to peers or the wider industry because it explicitly incorporates company specific characteristics rather than assuming that all pharma names deserve the same multiple. With the current 1.0x multiple sitting well below the 3.38x Fair Ratio, this framework points to Viatris being undervalued on a sales basis.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Viatris Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, which are simple, story driven scenarios that link your view of Viatris’ future revenues, earnings and margins to a financial forecast, a fair value estimate and a clear buy or sell signal. This is done by comparing that fair value with today’s price, all inside an easy to use tool on Simply Wall St’s Community page that updates dynamically as new news or earnings arrive. For example, one investor might build a bullish Viatris Narrative around steady 1.5% revenue growth, roughly 3% long term margins and a fair value near $12.44 per share, while another more cautious investor could assume flat revenues, weaker margins and a fair value closer to $8. This gives you a transparent way to see how different stories about the same company lead to very different conclusions about whether to own the stock at its current price.

Do you think there's more to the story for Viatris? Head over to our Community to see what others are saying!

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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