Vertex Pharmaceuticals IncorporatedVRTXNASDAQ

Overview Intelligence Charts News Fundamentals DCF Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $652.97 per share(market-calibrated)

+36.8%

Upside to Fair Value

Current

$477.32

Pure Model

$706.37

Fair Value

$652.97

Bull Case

$936.45

Bear Case

$523.80

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

0.67%

Calibrated Growth

2.42%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $706.37.

What's Driving This Ratingfor VRTX

✓

CapEx already efficient

CapEx at 2.37% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 34.33% — below the sector mature average of 39.43%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $8.9B (34.33% margin).

→

Moderate revenue growth

Analyst consensus projects 8.27% revenue growth, fading to 3.00% by Year 10. Revenue reaches $25.9B (vs $12.1B today).

🎯

Market pricing in lower growth than model

The market implies only 0.67% perpetual growth — 233bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 78.34% indicates efficient cash generation. FCF reaches $7.3B by Year 10 (28.03% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.32

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)5.94%

Cost of Debt

Pre-tax Cost of Debt1.05%

Tax Rate14.86%

After-tax Cost of Debt0.90%

Equity Weight (E/V)96.92%

Debt Weight (D/V)3.08%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (96.92% × 5.94%) + (3.08% × 0.90%)

= 5.78%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$13.1B	$15.8B	$19.4B	$22.7B	$25.9B
EBIT	$4.5B	$5.4B	$6.7B	$7.8B	$8.9B
Tax	$667M	$806M	$989M	$1.2B	$1.3B
NOPAT	$3.8B	$4.6B	$5.7B	$6.6B	$7.6B
+ Depreciation	$188M	$228M	$279M	$327M	$373M
- Capex	$310M	$375M	$460M	$539M	$615M
- Δ NWC	$93M	$134M	$170M	$146M	$70M
Free Cash Flow	$3.6B	$4.3B	$5.3B	$6.3B	$7.3B
Discount Factor	0.945	0.845	0.755	0.675	0.570
Present Value	$3.4B	$3.7B	$4.0B	$4.2B	$4.1B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$7.3B

Terminal Growth Rate3.00%

WACC5.78%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$268.8B

PV of Terminal Value$153.2B

Exit Multiple Method

Year 10 EBITDA$9.3B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$222.2B

PV of Terminal Value$126.7B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$39.5B

PV of Terminal Value$153.2B

Enterprise Value$192.7B

(-) Net Debt-$1.2B

Equity Value$193.9B

Shares Outstanding256M

Price per Share$758.24

Exit Multiple Method

PV of Projected FCFs$39.5B

PV of Terminal Value$126.7B

Enterprise Value$166.1B

(-) Net Debt-$1.2B

Equity Value$167.4B

Shares Outstanding256M

Price per Share$654.49

Pure Model Fair Value

$706.37

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
3.78%	$957.17	$918.14	$880.95	$845.52	$811.73
4.78%	$766.35	$839.85	$880.95	$845.52	$811.73
5.78%	$624.97	$659.46	$706.37	$773.84	$811.73
6.78%	$533.57	$552.78	$577.07	$608.76	$651.86
7.78%	$467.34	$479.18	$493.50	$511.16	$533.50

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$523.80

9.7% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.40

Base Case

$706.37

48.0% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.32

Bull Case

$936.45

96.2% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.30

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Healthcare Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth8.27%

Year 3 Revenue Growth10.02%

Year 5 Revenue Growth10.44%

Year 7 Revenue Growth7.46%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin34.33%

Terminal EBIT Margin39.43%

Tax Rate14.86%

Historical Capex / Rev2.37%

NWC / Revenue9.29%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 24x EV/EBITDA (Healthcare sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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