Does Vertex Still Offer Value After Its Strong 2025 Run and DCF Upside Potential?

• If you are wondering whether Vertex Pharmaceuticals still offers good value after its big run, or if you would be buying in too late, you are in the right place to unpack what the current price really implies.
• The stock has climbed to around $460.31, with returns of 1.0% over the last week, 7.9% over the last month, and 13.4% year to date, adding to a 13.6% gain over 1 year and 98.0% over 5 years.
• Recent sentiment has been shaped by ongoing optimism around Vertex's cystic fibrosis franchise and its expanding pipeline in areas such as gene editing and pain, which many investors see as long term value drivers. At the same time, headlines about increasing competition in rare disease treatments and regulatory scrutiny on drug pricing have reminded the market that the growth story comes with real risks attached.
• Right now, our valuation framework gives Vertex a 3/6 value score, suggesting it screens as undervalued on half of our checks. We will break down what that means across different valuation methods, before finishing with a more intuitive way to judge whether the stock really fits your long term strategy.

Find out why Vertex Pharmaceuticals's 13.6% return over the last year is lagging behind its peers.

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

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

For Vertex Pharmaceuticals, the model starts with last twelve months free cash flow of about $3.3 billion, then uses analyst forecasts for the next few years and extrapolates further growth. By 2029, free cash flow is projected to reach roughly $6.7 billion, with a gradual moderation in growth through 2035 as the business matures.

Using this 2 Stage Free Cash Flow to Equity framework, Simply Wall St estimates an intrinsic value of about $712.87 per share. Compared with the current share price around $460, the DCF suggests the stock is trading at roughly a 35.4% discount to its estimated fair value.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Vertex Pharmaceuticals is undervalued by 35.4%. Track this in your watchlist or portfolio, or discover 898 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 Vertex Pharmaceuticals.

Approach 2: Vertex Pharmaceuticals Price vs Earnings

For profitable companies like Vertex, the price to earnings ratio is a useful way to gauge what investors are willing to pay today for each dollar of current profits. In general, stronger and more reliable growth justifies a higher PE, while higher risk or more volatile earnings usually deserve a lower, more conservative multiple.

Vertex currently trades on a PE of about 31.78x. That is above the broader Biotechs industry average of around 20.73x, but well below the peer group average closer to 58.37x, suggesting investors are already paying a premium for its quality and pipeline, though not an extreme one. Simply Wall St also calculates a Fair Ratio of roughly 29.79x, which is the PE we would expect given Vertexs specific mix of earnings growth, margins, industry, market cap and risk profile.

This Fair Ratio is more informative than a simple comparison with peers or the sector, because it adjusts for company level characteristics rather than assuming all biotechs deserve similar valuations. With the shares trading modestly above this Fair Ratio, the PE based view points to a stock that looks slightly expensive rather than obviously cheap.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1457 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 us introduce you to Narratives, a simple way to connect your view of Vertex Pharmaceuticals future with concrete numbers like revenue, earnings, margins and, ultimately, a Fair Value estimate. A Narrative is your story about the company, translated into a financial forecast, which then flows through to a Fair Value that you can compare with the current share price to decide whether you see Vertex as a buy, a hold, or a sell. On Simply Wall St, millions of investors build and follow Narratives on the Community page, using them as an accessible tool that stays up to date as new news, guidance, or earnings results arrive and the numbers automatically refresh. For example, one Vertex Narrative assumes stronger growth, higher margins and a Fair Value near $604 per share, while a more cautious Narrative bakes in slower growth and lower margins for a Fair Value closer to $485, illustrating how different perspectives on the same business can still be grounded in structured, comparable forecasts.

Do you think there's more to the story for Vertex Pharmaceuticals? 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com