Viatris’s stock price has taken a beating over the past six months, shedding 27.7% of its value and falling to $9.10 per share. This might have investors contemplating their next move.
Is now the time to buy Viatris, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think Viatris Will Underperform?
Even with the cheaper entry price, we're sitting this one out for now. Here are three reasons why you should be careful with VTRS and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Viatris’s 4.3% annualized revenue growth over the last five years was mediocre. This fell short of our benchmark for the healthcare sector. 
2. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for Viatris, its EPS declined by 11.1% annually over the last five years while its revenue grew by 4.3%. This tells us the company became less profitable on a per-share basis as it expanded.
3. Previous Growth Initiatives Have Lost Money
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Viatris’s five-year average ROIC was negative 2.9%, meaning management lost money while trying to expand the business. Its returns were among the worst in the healthcare sector.
Final Judgment
Viatris doesn’t pass our quality test. Following the recent decline, the stock trades at 3.9× forward P/E (or $9.10 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better investments elsewhere. We’d suggest looking at the most entrenched endpoint security platform on the market.
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