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Vertex Pharmaceuticals (VRTX): analysis traps
Where its figures could mislead a reader, and what to check before taking them at face value · Data: Q3 2026, to Sep 30, 2026, filed Nov 3, 2026; rules v1.1
Vertex Pharmaceuticals (VRTX): 0 rules of 10 triggered on the filings to Sep 30, 2026. 2 to review; 1 with insufficient data; 2 not applicable. Each is a question to verify, with the normal explanation that would produce the same figures.
Check these first
Low P/E at a cyclical peak = undervalued To review · confidence medium
Net income of $4.0B is at a high against a median of $2.7B over eight years; at 35.1× the market is not pricing it as cheap, but a multiple on this year's profit still understates the mid-cycle one (51.5×).
A precise DCF value = the true value To review · confidence high
The DCF's point value is 314.43 a share (price 547.09); 78% of it is the terminal value, a number about years no one has seen. Moving revenue growth (each year) by ±5 pts alone takes it from 255.60 to 384.68; across every method the research ran the range is 69 to 816. The value is a range; the decimals are not information.
Innocent reading: A stable, mature business with a narrow range of outcomes, where the point value is a fair summary.
Every rule
A01 FCF growth = the business improved Not triggered confidence medium
Free cash flow rose $4.0B to $3.2B; working capital and lower capex explain 0% of it, so most of the gain is in operating cash flow itself.
The figures and how they are read
| Fiscal year before | FY2024 |
| Fiscal year | FY2025 |
| Operating cash flow, year before | −$493M |
| Operating cash flow | $3.6B |
| Capex, year before | $298M |
| Capex | $438M |
| Free cash flow, year before | −$790M |
| Free cash flow | $3.2B |
| Change in FCF | $4.0B |
| Change in capex | $140M |
| Working capital: change in its cash contribution | −$793M |
| Of which: capex cut | 0.00 |
| Of which: working capital released | 0.00 |
| Share of the increase that need not repeat | +0.0% |
| Operating cash flow before working capital: change | 4917100000.00 |
FCF = operating cash flow − cash capex; ΔFCF = ΔOCF − ΔCapEx; the working-capital part is the change in the cash-bridge items (receivables, inventory, payables, accruals), with the sign of the cash flow statement
Source: FY2025 (cash flow statement, fiscal year) · FY2024 (cash flow statement, fiscal year before)
A07 Stock compensation added back = no economic cost Not triggered confidence high
Stock compensation is 5.7% of revenue, but buybacks of $2.0B covered it (2.9×) and the diluted share count was about flat: the dilution has been paid for in cash.
The figures and how they are read
| Fiscal year | FY2025 |
| Stock compensation | $686M |
| Revenue | $12.0B |
| SBC / revenue | +5.7% |
| Buybacks | $2.0B |
| Buybacks / SBC | 2.9 |
| Diluted shares, year before | 257.9M shares |
| Diluted shares | 258.0M shares |
| Diluted shares: change | +0.0% |
SBC / revenue from the cash flow statement's add-back; the diluted weighted share count year over year; buybacks from the financing section
Source: FY2025 (stock compensation, buybacks and the diluted share count, fiscal year)
B02 Receivables growing = future cash is certain Not triggered confidence medium
Receivables grew 19% against revenue 12% in Q3 2026; DSO 59 against a median of 57: collections are keeping pace with sales.
The figures and how they are read
| Quarter | Q3 2026 |
| Revenue, year over year | +11.8% |
| Receivables, year over year | +18.7% |
| Quarter before | Q2 2026 |
| Revenue y/y, quarter before | +12.4% |
| Receivables y/y, quarter before | +12.7% |
| Days sales outstanding | 59.4 |
| DSO, median of eight quarters | 56.8 |
| Receivables | $2.3B |
| Revenue | $3.4B |
receivables and revenue against the same quarter a year earlier; DSO = receivables / quarterly revenue × days, against the median of the eight quarters before
Source: Q3 2026 (receivables and revenue) · Q3 2025 (the same quarter a year earlier)
B08 Adjusted profit = economic profit Insufficient data
no reconciliation table read from the releases yet and fewer than three quarters with both an adjusted and a GAAP EPS
C02 Low net debt = no refinancing risk Not triggered confidence medium
$1000M comes due within a year, 9.5× covered by cash and investments of $6.3B plus $3.2B of free cash flow.
The figures and how they are read
| Cash and investments | $6.3B |
| Debt | $4.5B |
| Net debt | −$1.8B |
| Due within a year | $1000M |
| Read from | the current portion of debt on the balance sheet |
| Free cash flow, twelve months | $3.2B |
| Cash plus free cash flow | $9.5B |
| Coverage of what is due | 9.5 |
| Due in the second year | — |
| Balance sheet date | 2026-09-30 |
due within a year from the maturity table (else the current portion of debt), against cash and investments plus free cash flow over the last twelve months (zero if negative); no credit lines assumed
Source: 2026-09-30 (debt maturities, cash and investments)
D03 EPS growth = profit growth Not triggered confidence high
EPS fell 39% and net income fell 40% in Q3 2026; the share count fell 0.9%: EPS growth follows profit growth.
The figures and how they are read
| Quarter | Q3 2026 |
| Quarter before | Q3 2025 |
| EPS, year before | $4.20 |
| EPS | $2.56 |
| Net income, year before | $1.1B |
| Net income | $654M |
| Diluted shares, year before | 257.6M shares |
| Diluted shares | 255.2M shares |
| EPS growth | -39.1% |
| Net income growth | -39.6% |
| Diluted shares: change | -0.9% |
| eps from profit | -$1.67 |
| eps from share count | $0.02 |
EPS and net income against the same quarter a year earlier; the EPS bridge attributes the change to profit first, then to the share count (the order is fixed and disclosed)
Source: Q3 2026 (net income, diluted shares, EPS) · Q3 2025 (the same quarter a year earlier)
E02 Low P/E at a cyclical peak = undervalued To review confidence medium
Net income of $4.0B is at a high against a median of $2.7B over eight years; at 35.1× the market is not pricing it as cheap, but a multiple on this year's profit still understates the mid-cycle one (51.5×).
The figures and how they are read
| market value | $139.6B |
| net income ttm | $4.0B |
| pe ttm | 35.10 |
| net income median fy | $2.7B |
| pe mid cycle | 51.50 |
| net income peak fy | $4.0B |
| years | FY2018 / 2097.0; FY2019 / 1177.0; FY2020 / 2712.0; FY2021 / 2342.0; FY2022 / 3322.0; FY2023 / 3620.0; FY2024 / -536.0; FY2025 / 3953.0 |
| down years in window | 3 |
P/E on the trailing twelve months' net income against the P/E on the median net income of the last eight fiscal years (a mid-cycle stand-in); 'at a peak' = this year's profit at or above 90% of the best year and at least 1.3× the median
Source: Q3 2026 (net income, trailing twelve months)
What would show the trap does not apply
- Profit holds at this level through the next two years (the eight-year peak was a new base, not a top)
- The industry's capacity and prices stay where they are rather than reverting
Look again: next filing.
E07 A precise DCF value = the true value To review confidence high
The DCF's point value is 314.43 a share (price 547.09); 78% of it is the terminal value, a number about years no one has seen. Moving revenue growth (each year) by ±5 pts alone takes it from 255.60 to 384.68; across every method the research ran the range is 69 to 816. The value is a range; the decimals are not information.
The figures and how they are read
| dcf value | 314.43 |
| price | 547.09 |
| terminal value share | +78.4% |
| swing by input | Revenue growth (each year) / ±5 pts / 255.6 / 384.68; WACC / ±1 pt / 264.19 / 388.97; Operating margin / ±3 pts / 286.18 / 342.68; Tax rate / ±5 pts / 295.7 / 333.16 |
| range all methods | 68.87; 816.41 |
the DCF's point value against the share of it that is the terminal value and the value at each input moved by one step (growth ±5 pts, WACC ±1 pt, margin ±3 pts …); the range across every method the research ran
Source: 2026-11-08 (valuation research)
What would explain it innocently
- A stable, mature business with a narrow range of outcomes, where the point value is a fair summary
- The inputs that matter most are themselves well known (a regulated return, a long contract)
What to look for in the filing
- Which input you believe differs from the research's and why
- What the price implies for growth (the reverse DCF on the fair-value page)
What would show the trap does not apply
- The DCF's value is robust to the terminal growth and discount rate (the range's low end is still above the price)
- The company's cash flows over the next three years track the DCF's early years
Look again: next filing.
J06 A bank's low P/E and high profit = safe Not applicable
not a bank
J08 A REIT's low net income = the dividend is unsafe Not applicable
not a REIT
What the statuses mean
Triggered: the filings show the pattern; read the normal explanations and the missing evidence before concluding anything. To review: one quarter or a weak signal; a reader's judgement, not a pattern. Not triggered: the pattern is absent on these figures. Insufficient data: the filings read so far do not hold what the rule needs; this is not a clean bill. Not applicable: the rule is not meant for this kind of company (a bank's working capital, a loss-making quarter's EPS growth). Out of date: the latest filing is more than fifteen months old.
Severity is what the pattern could mean for cash, value or solvency; confidence is how reliable the inputs and the reading are. The two are kept apart.
Record a view
A reader's judgement, grounds, what would change it and the next review; kept in the browser (needs JavaScript).
Every rule and the companies it triggers on → Vertex Pharmaceuticals: cash flow → Earnings quality score →
Each rule reads the company's own filings by a fixed formula and says what would explain the same figures innocently. A triggered rule is a question to verify, not a finding of manipulation, and not a view on the stock. Missing data is shown as missing, never as clear. Not investment advice.