Intrinsic value of Vertex Pharmaceuticals - VRTX

Previous Close

$177.40

  Intrinsic Value

$110.16

stock screener

  Rating & Target

sell

-38%

Previous close

$177.40

 
Intrinsic value

$110.16

 
Up/down potential

-38%

 
Rating

sell

We calculate the intrinsic value of VRTX stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2017), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 44.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  46.20
  42.08
  38.37
  35.03
  32.03
  29.33
  26.90
  24.71
  22.74
  20.96
  19.37
  17.93
  16.64
  15.47
  14.43
  13.48
  12.63
  11.87
  11.18
  10.57
  10.01
  9.51
  9.06
  8.65
  8.29
  7.96
  7.66
  7.40
  7.16
  6.94
Revenue, $m
  3,639
  5,170
  7,154
  9,660
  12,755
  16,496
  20,932
  26,104
  32,038
  38,754
  46,259
  54,553
  63,629
  73,473
  84,072
  95,407
  107,462
  120,218
  133,663
  147,786
  162,577
  178,035
  194,160
  210,958
  228,439
  246,618
  265,513
  285,150
  305,556
  326,763
Variable operating expenses, $m
  3,111
  4,417
  6,109
  8,247
  10,886
  14,076
  17,859
  22,270
  27,331
  33,059
  39,451
  46,524
  54,264
  62,660
  71,699
  81,366
  91,646
  102,525
  113,992
  126,035
  138,650
  151,833
  165,585
  179,911
  194,819
  210,322
  226,437
  243,184
  260,586
  278,672
Fixed operating expenses, $m
  245
  251
  256
  262
  268
  273
  279
  286
  292
  298
  305
  312
  318
  325
  333
  340
  347
  355
  363
  371
  379
  387
  396
  405
  414
  423
  432
  441
  451
  461
Total operating expenses, $m
  3,356
  4,668
  6,365
  8,509
  11,154
  14,349
  18,138
  22,556
  27,623
  33,357
  39,756
  46,836
  54,582
  62,985
  72,032
  81,706
  91,993
  102,880
  114,355
  126,406
  139,029
  152,220
  165,981
  180,316
  195,233
  210,745
  226,869
  243,625
  261,037
  279,133
Operating income, $m
  282
  502
  789
  1,152
  1,602
  2,146
  2,793
  3,548
  4,415
  5,397
  6,503
  7,717
  9,046
  10,488
  12,041
  13,702
  15,468
  17,338
  19,309
  21,379
  23,548
  25,815
  28,179
  30,643
  33,207
  35,873
  38,645
  41,525
  44,519
  47,630
EBITDA, $m
  429
  708
  1,070
  1,529
  2,097
  2,784
  3,601
  4,553
  5,647
  6,886
  8,270
  9,801
  11,477
  13,295
  15,252
  17,346
  19,573
  21,930
  24,415
  27,025
  29,759
  32,616
  35,596
  38,702
  41,933
  45,294
  48,787
  52,418
  56,191
  60,112
Interest expense (income), $m
  84
  47
  101
  174
  268
  388
  535
  713
  924
  1,170
  1,452
  1,771
  2,128
  2,523
  2,955
  3,423
  3,927
  4,466
  5,039
  5,646
  6,286
  6,957
  7,661
  8,396
  9,163
  9,962
  10,794
  11,658
  12,557
  13,491
  14,462
Earnings before tax, $m
  236
  401
  615
  884
  1,214
  1,611
  2,080
  2,624
  3,246
  3,945
  4,732
  5,589
  6,523
  7,533
  8,618
  9,775
  11,002
  12,298
  13,663
  15,094
  16,591
  18,154
  19,783
  21,480
  23,245
  25,080
  26,987
  28,968
  31,028
  33,168
Tax expense, $m
  64
  108
  166
  239
  328
  435
  562
  709
  876
  1,065
  1,278
  1,509
  1,761
  2,034
  2,327
  2,639
  2,971
  3,321
  3,689
  4,075
  4,479
  4,902
  5,341
  5,800
  6,276
  6,771
  7,286
  7,821
  8,378
  8,955
Net income, $m
  172
  293
  449
  645
  886
  1,176
  1,519
  1,916
  2,369
  2,880
  3,454
  4,080
  4,762
  5,499
  6,291
  7,135
  8,031
  8,978
  9,974
  11,018
  12,111
  13,252
  14,442
  15,680
  16,969
  18,308
  19,700
  21,147
  22,650
  24,213

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  3,308
  4,700
  6,504
  8,782
  11,595
  14,996
  19,029
  23,731
  29,126
  35,231
  42,054
  49,594
  57,844
  66,794
  76,429
  86,734
  97,692
  109,289
  121,512
  134,351
  147,798
  161,850
  176,510
  191,780
  207,672
  224,198
  241,376
  259,227
  277,778
  297,058
Adjusted assets (=assets-cash), $m
  3,308
  4,700
  6,504
  8,782
  11,595
  14,996
  19,029
  23,731
  29,126
  35,231
  42,054
  49,594
  57,844
  66,794
  76,429
  86,734
  97,692
  109,289
  121,512
  134,351
  147,798
  161,850
  176,510
  191,780
  207,672
  224,198
  241,376
  259,227
  277,778
  297,058
Revenue / Adjusted assets
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
Average production assets, $m
  1,390
  1,975
  2,733
  3,690
  4,872
  6,301
  7,996
  9,972
  12,239
  14,804
  17,671
  20,839
  24,306
  28,067
  32,116
  36,446
  41,050
  45,923
  51,059
  56,454
  62,105
  68,009
  74,169
  80,586
  87,264
  94,208
  101,426
  108,927
  116,722
  124,824
Working capital, $m
  55
  78
  107
  145
  191
  247
  314
  392
  481
  581
  694
  818
  954
  1,102
  1,261
  1,431
  1,612
  1,803
  2,005
  2,217
  2,439
  2,671
  2,912
  3,164
  3,427
  3,699
  3,983
  4,277
  4,583
  4,901
Total debt, $m
  1,266
  2,176
  3,356
  4,846
  6,686
  8,910
  11,548
  14,622
  18,151
  22,144
  26,606
  31,537
  36,932
  42,786
  49,087
  55,826
  62,993
  70,578
  78,571
  86,968
  95,762
  104,953
  114,540
  124,527
  134,920
  145,728
  156,962
  168,637
  180,769
  193,378
Total liabilities, $m
  2,164
  3,074
  4,253
  5,744
  7,583
  9,807
  12,445
  15,520
  19,048
  23,041
  27,503
  32,434
  37,830
  43,683
  49,985
  56,724
  63,891
  71,475
  79,469
  87,865
  96,660
  105,850
  115,437
  125,424
  135,817
  146,625
  157,860
  169,535
  181,667
  194,276
Total equity, $m
  1,145
  1,626
  2,250
  3,039
  4,012
  5,189
  6,584
  8,211
  10,078
  12,190
  14,551
  17,159
  20,014
  23,111
  26,445
  30,010
  33,802
  37,814
  42,043
  46,485
  51,138
  56,000
  61,072
  66,356
  71,854
  77,572
  83,516
  89,693
  96,111
  102,782
Total liabilities and equity, $m
  3,309
  4,700
  6,503
  8,783
  11,595
  14,996
  19,029
  23,731
  29,126
  35,231
  42,054
  49,593
  57,844
  66,794
  76,430
  86,734
  97,693
  109,289
  121,512
  134,350
  147,798
  161,850
  176,509
  191,780
  207,671
  224,197
  241,376
  259,228
  277,778
  297,058
Debt-to-equity ratio
  1.110
  1.340
  1.490
  1.590
  1.670
  1.720
  1.750
  1.780
  1.800
  1.820
  1.830
  1.840
  1.850
  1.850
  1.860
  1.860
  1.860
  1.870
  1.870
  1.870
  1.870
  1.870
  1.880
  1.880
  1.880
  1.880
  1.880
  1.880
  1.880
  1.880
Adjusted equity ratio
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  172
  293
  449
  645
  886
  1,176
  1,519
  1,916
  2,369
  2,880
  3,454
  4,080
  4,762
  5,499
  6,291
  7,135
  8,031
  8,978
  9,974
  11,018
  12,111
  13,252
  14,442
  15,680
  16,969
  18,308
  19,700
  21,147
  22,650
  24,213
Depreciation, amort., depletion, $m
  147
  205
  281
  377
  495
  638
  808
  1,005
  1,232
  1,488
  1,767
  2,084
  2,431
  2,807
  3,212
  3,645
  4,105
  4,592
  5,106
  5,645
  6,210
  6,801
  7,417
  8,059
  8,726
  9,421
  10,143
  10,893
  11,672
  12,482
Funds from operations, $m
  319
  498
  730
  1,022
  1,381
  1,814
  2,326
  2,921
  3,601
  4,368
  5,221
  6,164
  7,192
  8,306
  9,502
  10,780
  12,136
  13,570
  15,080
  16,664
  18,322
  20,053
  21,859
  23,739
  25,695
  27,729
  29,843
  32,040
  34,323
  36,695
Change in working capital, $m
  17
  23
  30
  38
  46
  56
  67
  78
  89
  101
  113
  124
  136
  148
  159
  170
  181
  191
  202
  212
  222
  232
  242
  252
  262
  273
  283
  295
  306
  318
Cash from operations, $m
  302
  475
  700
  984
  1,335
  1,758
  2,260
  2,843
  3,512
  4,268
  5,109
  6,039
  7,056
  8,158
  9,344
  10,610
  11,956
  13,379
  14,878
  16,452
  18,100
  19,821
  21,617
  23,487
  25,433
  27,456
  29,559
  31,745
  34,016
  36,377
Maintenance CAPEX, $m
  -95
  -139
  -198
  -273
  -369
  -487
  -630
  -800
  -997
  -1,224
  -1,480
  -1,767
  -2,084
  -2,431
  -2,807
  -3,212
  -3,645
  -4,105
  -4,592
  -5,106
  -5,645
  -6,210
  -6,801
  -7,417
  -8,059
  -8,726
  -9,421
  -10,143
  -10,893
  -11,672
New CAPEX, $m
  -439
  -585
  -758
  -957
  -1,182
  -1,429
  -1,695
  -1,976
  -2,267
  -2,565
  -2,867
  -3,168
  -3,467
  -3,761
  -4,049
  -4,330
  -4,605
  -4,873
  -5,136
  -5,395
  -5,650
  -5,905
  -6,160
  -6,417
  -6,678
  -6,944
  -7,218
  -7,501
  -7,795
  -8,101
Cash from investing activities, $m
  -534
  -724
  -956
  -1,230
  -1,551
  -1,916
  -2,325
  -2,776
  -3,264
  -3,789
  -4,347
  -4,935
  -5,551
  -6,192
  -6,856
  -7,542
  -8,250
  -8,978
  -9,728
  -10,501
  -11,295
  -12,115
  -12,961
  -13,834
  -14,737
  -15,670
  -16,639
  -17,644
  -18,688
  -19,773
Free cash flow, $m
  -233
  -249
  -255
  -246
  -216
  -158
  -65
  68
  248
  478
  761
  1,104
  1,506
  1,967
  2,488
  3,068
  3,706
  4,401
  5,150
  5,951
  6,804
  7,706
  8,656
  9,653
  10,696
  11,786
  12,920
  14,101
  15,329
  16,604
Issuance/(repayment) of debt, $m
  682
  910
  1,180
  1,490
  1,840
  2,224
  2,638
  3,075
  3,528
  3,993
  4,462
  4,931
  5,396
  5,853
  6,301
  6,739
  7,167
  7,584
  7,994
  8,396
  8,794
  9,190
  9,587
  9,987
  10,393
  10,808
  11,234
  11,675
  12,132
  12,609
Issuance/(repurchase) of shares, $m
  191
  189
  175
  143
  87
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  873
  1,099
  1,355
  1,633
  1,927
  2,224
  2,638
  3,075
  3,528
  3,993
  4,462
  4,931
  5,396
  5,853
  6,301
  6,739
  7,167
  7,584
  7,994
  8,396
  8,794
  9,190
  9,587
  9,987
  10,393
  10,808
  11,234
  11,675
  12,132
  12,609
Total cash flow (excl. dividends), $m
  641
  851
  1,100
  1,387
  1,711
  2,066
  2,573
  3,143
  3,776
  4,471
  5,223
  6,035
  6,901
  7,820
  8,790
  9,808
  10,873
  11,985
  13,143
  14,348
  15,598
  16,896
  18,243
  19,640
  21,090
  22,594
  24,155
  25,776
  27,461
  29,213
Retained Cash Flow (-), $m
  -363
  -482
  -624
  -788
  -973
  -1,177
  -1,396
  -1,627
  -1,867
  -2,112
  -2,361
  -2,609
  -2,855
  -3,097
  -3,334
  -3,565
  -3,792
  -4,013
  -4,229
  -4,442
  -4,653
  -4,862
  -5,072
  -5,284
  -5,499
  -5,718
  -5,944
  -6,177
  -6,419
  -6,671
Prev. year cash balance distribution, $m
  1,260
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  291
  426
  605
  837
  1,130
  1,492
  1,930
  2,449
  3,054
  3,748
  4,534
  5,412
  6,383
  7,445
  8,596
  9,836
  11,163
  12,573
  14,066
  15,639
  17,291
  19,022
  20,830
  22,717
  24,682
  26,727
  28,854
  31,065
  33,363
  35,750
Cash available for distribution, $m
  1,538
  369
  476
  599
  737
  890
  1,177
  1,516
  1,910
  2,359
  2,863
  3,426
  4,047
  4,724
  5,456
  6,242
  7,082
  7,973
  8,914
  9,906
  10,946
  12,034
  13,171
  14,357
  15,591
  16,876
  18,211
  19,599
  21,042
  22,542
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  1,474
  338
  414
  493
  572
  646
  795
  948
  1,097
  1,237
  1,359
  1,462
  1,539
  1,586
  1,602
  1,586
  1,541
  1,468
  1,373
  1,259
  1,132
  999
  863
  731
  607
  492
  391
  303
  230
  170
Current shareholders' claim on cash, %
  97.6
  96.0
  95.0
  94.4
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1

Vertex Pharmaceuticals Incorporated is engaged in discovering, developing, manufacturing and commercializing medicines for serious diseases. The Company is focused on developing and commercializing therapies for the treatment of cystic fibrosis (CF) and advancing its research and development programs in other indications. The Company's marketed medicines are ORKAMBI and KALYDECO. ORKAMBI (lumacaftor in combination with ivacaftor) is approved as a treatment for patients having two copies (homozygous) of the Delta-F508 (F508del) mutation in their cystic fibrosis transmembrane conductance regulator (CFTR) gene. KALYDECO (ivacaftor) is approved for the treatment of CF patients having the G551D mutation or other specified mutations in their CFTR gene. The Company's development programs in the field of CF include Tezacaftor (VX-661), VX-152, VX-440, VX-659, VX-445 and VX-371. VX-152, VX-440, VX-659 and VX-445 are CFTR corrector compounds.

FINANCIAL RATIOS  of  Vertex Pharmaceuticals (VRTX)

Valuation Ratios
P/E Ratio -393.3
Price to Sales 25.9
Price to Book 38.1
Price to Tangible Book
Price to Cash Flow 186.6
Price to Free Cash Flow 246.1
Growth Rates
Sales Growth Rate 64.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 26.7%
Cap. Spend. - 3 Yr. Gr. Rate 2.2%
Financial Strength
Quick Ratio 4
Current Ratio 0.1
LT Debt to Equity 45.1%
Total Debt to Equity 72.7%
Interest Coverage 0
Management Effectiveness
Return On Assets -0.2%
Ret/ On Assets - 3 Yr. Avg. -16.1%
Return On Total Capital -6%
Ret/ On T. Cap. - 3 Yr. Avg. -25.2%
Return On Equity -10.7%
Return On Equity - 3 Yr. Avg. -42.2%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 87.8%
Gross Margin - 3 Yr. Avg. 89.9%
EBITDA Margin 4.6%
EBITDA Margin - 3 Yr. Avg. -46.4%
Operating Margin 0.6%
Oper. Margin - 3 Yr. Avg. -52.6%
Pre-Tax Margin -3.9%
Pre-Tax Margin - 3 Yr. Avg. -61.6%
Net Profit Margin -6.6%
Net Profit Margin - 3 Yr. Avg. -62.6%
Effective Tax Rate -25.4%
Eff/ Tax Rate - 3 Yr. Avg. -10.6%
Payout Ratio 0%

VRTX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VRTX stock intrinsic value calculation we used $2489 million for the last fiscal year's total revenue generated by Vertex Pharmaceuticals. The default revenue input number comes from 2017 income statement of Vertex Pharmaceuticals. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our VRTX stock valuation model: a) initial revenue growth rate of 46.2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for VRTX is calculated based on our internal credit rating of Vertex Pharmaceuticals, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Vertex Pharmaceuticals.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of VRTX stock the variable cost ratio is equal to 85.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $240 million in the base year in the intrinsic value calculation for VRTX stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 8% for Vertex Pharmaceuticals.

Corporate tax rate of 27% is the nominal tax rate for Vertex Pharmaceuticals. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the VRTX stock is equal to 11.7%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for VRTX are equal to 38.2%.

Life of production assets of 10 years is the average useful life of capital assets used in Vertex Pharmaceuticals operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for VRTX is equal to 1.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $2042 million for Vertex Pharmaceuticals - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 249 million for Vertex Pharmaceuticals is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Vertex Pharmaceuticals at the current share price and the inputted number of shares is $44.2 billion.

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