Viatris: Buy or Sell? Viatris (VTRS) is a pharmaceutical company that sells a variety of different drugs. The company plans to offer its first ever dividend and is currently trading at a very low valuation. Does that make it a Buy? Read more to find out.
By Patrick Ryan •
This story originally appeared on StockNews
Viatris (VTRS) is a Pittsburgh-based healthcare business that provides medicines. Previously conducting business under the name of Mylan NV, VTRS makes generic drugs. Mylan ended up merging with a division of Pfizer known as Upjohn, resulting in the name change.
VTRS was trading around $13 for much of April and early May. The stock then climbed to $15 in the second week of May and even broke through $16 this past week. However, if you take a look at VTRS's six-month chart, you would find the stock traded between $16 and $18 between the end of 2020 and the first couple of months of 2021. VTRS tumbled in late February, dropping from $18 to $13.
Is VTRS a Buy now? Let's find out.
VTRS Points of Note
Take a look at VTRS's numbers, and the one that sticks out is its astonishingly low forward P/E ratio of 4.51. This is an absurdly low forward P/E ratio, especially when you consider the fact that VTRS is trading about $3.50 below its 52-week high of $19.24. In other words, VTRS has good value, as evidenced by its B grade in the Value component of the POWR Ratings.
VTRS will declare its first-ever dividend in the months ahead. However, no one knows what percentage return the dividend will provide. Some have guessed it will be around 3.3% based on VTRS's current trading price.
It must be noted that VTRS is not a growth stock. VTRS makes generic drugs, meaning they are cheaper versions of other medications. However, VTRS will continue to add even more drugs to its offerings as they continue to move off patent. If VTRS enjoys any type of meaningful growth in the months and years ahead, it will likely be from the international market. In particular, China is emerging as a massive market for VTRS generic drug sales.
Unfortunately, VTRS executives provided guidance for 2021 as a whole that is significantly worse than anticipated. VTRS's brass projects yearly revenue in the range of $17.2 billion to $17.8 billion. The analysts who cover VTRS expected $18.5 billion of annual revenue. The reduced guidance is a large part of why VTRS fell off a cliff earlier this year. Revenue will underwhelm in the year ahead as sales of the company's older drugs decline. Celebrex, Lipitor, Lyrica, and Norvasc all contributed to stifling the company's growth before the merger referenced above.
The Analyst Take on VTRS
Analysts are bullish on VTRS, establishing an average target price of $20.07 for the stock. If VTRS hits this price point, it will have increased in value by slightly more than 32%. The highest target price for the stock is a whopping $35. The low target price for VTRS is $15. All in all, 17 analysts have issued VTRS recommendations. Two analysts view the stock as a Strong Buy, six consider it a Buy, and nine view it as a Hold.
VTRS POWR Ratings
Do not buy VTRS just because the analysts have high hopes for the stock. VTRS has an overall grade of C, which translates into a Neutral Rating in the POWR Ratings. The stock has grades of D in the Momentum and Quality components of the POWR Ratings. However, VTRS has a grade of A in the Growth component and a B for Value Grade. Click here to learn more about how VTRS fares in terms of Sentiment and Stability.
Out of the 494 publicly traded companies in the Biotech industry, VTRS is ranked 83rd. You can find top stocks in this industry by clicking here.
Buy or Sell?
Since VTRS is has a Neutral rating in the POWR Ratings, investors should sell or avoid buying. Though VTRS certainly has its merits in terms of its A Growth Grade and B Value grade, it is a risky play at its current price level. Wait for VTRS to improve its rating to a Buy or Strong Buy before buying.
VRTS shares were trading at $271.29 per share on Thursday morning, up $0.80 (+0.30%). Year-to-date, VRTS has gained 25.90%, versus a 10.93% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.
