Valuation Scorecard: Stock Rating A-Highest (4/9/24)-Viatris Inc (VTRS).

As reflected at the current price of $12, what future Viatris operating performance is the market anticipating? To achieve average annual stock market performance of 9.0% over the next 6 years, Viatris shares will need to reach $20. To achieve Upper quartile performance, Viatris’ stock price will need to reach $23 by 2029.

Executive Summary

• Key Viatris characteristics: below average financial strength, instability, very low profitability, and very low expected growth. A big negative influence on Viatris’ valuation is its poor Profitability.
• Very low valuation, leading shareholder returns. Current valuation levels are very low relative to the Viatris Peer Group. Recent market returns have significantly outperformed the Viatris Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, Viatris shares should reach a level of $28 by 2029 — an 18.3% per year total shareholder return. A 2029 stock price of $20 would reflect median performance and a price of $23 would be required to reach upper quartile performance.
• Viatris’ past growth is slightly below average. Historical growth has been below average relative to the Viatris Peer Group and forecasted growth is relatively very low. Equity Growth, and Asset Growth have lagged. These factors have negatively affected market perceptions of Viatris. Viatris’ historical income statement growth has been higher than growth in the balance sheet. Revenue growth has exceeded asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity. Viatris’ consensus growth expectations are in line with past growth.
• Profitability has been Viatris’ biggest valuation weakness. Pretax Margin, Pretax ROA, Return on Equity, and Asset Turnover are all group lagging. These factors have negatively affected market perceptions of Viatris. The company has normal cash needs.
• Viatris’ risk profile is unfavorable. Overall variability has been above average with above average revenue variability, very high E.P.S. variability, and only average stock price volatility. Financial Strength is only average and earnings’ expectations are below average. The debt/capital ratio has risen.

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