Long-established in the Drug Manufacturers industry, Viatris Inc (VTRS, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a decline of 3.39%, juxtaposed with a three-month change of 9.48%. Fresh insights from the GuruFocus Score Rating 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.
Decoding 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.
- 1. Financial strength rank: 4/10
- 2. Profitability rank: 6/10
- 3. Growth rank: 3/10
- 4. GF Value rank: 3/10
- 5. Momentum rank: 7/10
Based on the above method, GuruFocus assigned Viatris Inc the GF Score of 67 out of 100, which signals poor future outperformance potential.
Understanding Viatris Inc's Business
Viatris 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 Breakdown
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 1.95, which positions it worse than 85.67% of 670 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-Scoreis just 1.04, 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 0.04 indicates a struggle in handling existing debt levels.
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 -15.7 per year over the past three years, which underperforms worse than 87.72% of 912 companies in the Drug Manufacturers industry. Stagnating revenues may pose concerns in a fast-evolving market. Lastly, Viatris Inc predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. While Viatris Inc has a rich history and a broad market reach, its current financial and growth indicators suggest that it may struggle to maintain its past performance. Investors should consider these factors when making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
