Long-established in the Drug Manufacturers industry, Viatris Inc (VTRS, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 0.62%, juxtaposed with a three-month change of -2.35%. Fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Viatris Inc.
Understanding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 4/10
- Profitability rank: 5/10
- Growth rank: 2/10
- GF Value rank: 9/10
- Momentum rank: 4/10
Based on the above method, GuruFocus assigned Viatris Inc the GF Score of 65 out of 100, which signals poor future outperformance potential.
Company Overview
Viatris Inc was formed in November 2020 through the combination of Upjohn, a wholly owned subsidiary of Pfizer that specialized in off-patent drugs, and Mylan, a global pharmaceutical manufacturer that focused on generic and specialty drugs. By joining forces, Viatris became one of the largest generic drug manufacturers in the world, servicing over 165 countries. Generics (commoditized and complex) and biosimilars make up roughly 40% of Viatris' total sales. The remaining 60% of sales is derived from its portfolio of legacy products, which includes Lipitor, Norvasc, Lyrica, and Viagra. While it covers more than 10 major therapeutic areas, Viatris has identified dermatology, ophthalmology, and gastroenterology as its three key areas of focus for future innovations.
Financial Strength Concerns
Viatris Inc's financial strength indicators present some concerning insights about the company's balance sheet health. Viatris Inc has an interest coverage ratio of 0.18, which positions it worse than 98.62% of 654 companies in the Drug Manufacturers industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. It's worth noting that the esteemed investor Benjamin Graham typically favored companies with an interest coverage ratio of at least five.
The company's Altman Z-Score is just 0.48, which is below the distress zone of 1.81. This suggests that the company may face financial distress over the next few years. Additionally, the company's low cash-to-debt ratio at 0.07 indicates a struggle in handling existing debt levels.
Profitability Challenges
Viatris Inc's low Profitability rank can also raise warning signals. The company's operating margin stands at a mere 0.65%, which may not be sufficient to cover its financial obligations and invest in future growth opportunities. This low profitability could hinder Viatris Inc's ability to compete effectively in the highly competitive pharmaceutical industry.
Growth Prospects
A lack of significant growth is another area where Viatris Inc seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -5.8% per year over the past three years, which underperforms worse than 77.13% of 914 companies in the Drug Manufacturers industry. Stagnating revenues may pose concerns in a fast-evolving market.
Over the past five years, Viatris Inc has witnessed a decline in its earnings before interest, taxes, depreciation, and amortization (EBITDA). The three-year growth rate is recorded at -13.9%, while the five-year growth rate is at -10.8%. These figures underscore potential challenges in the company's profitability. Lastly, Viatris Inc predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
In conclusion, Viatris Inc's financial strength, profitability, and growth metrics, as highlighted by the GF Score, indicate potential underperformance. The company's low interest coverage ratio, declining revenue, and profitability challenges suggest that it may struggle to maintain its competitive position in the pharmaceutical industry. Investors should carefully consider these factors when evaluating Viatris Inc's future prospects. For those seeking companies with strong GF Scores, GuruFocus Premium members can find more options using the following screener link: GF Score Screen.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
