Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Vertex Pharmaceuticals Inc. (NASDAQ:VRTX)

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Economic Value Added (EVA)

Advanced level


Economic Profit

Vertex Pharmaceuticals Inc., economic profit calculation

US$ in thousands

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net operating profit after taxes (NOPAT)1
Cost of capital2
Invested capital3
 
Economic profit4

Based on: 10-K (filing date: 2020-02-13), 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-16).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= × =

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Vertex Pharmaceuticals Inc.’s economic profit increased from 2017 to 2018 and from 2018 to 2019.

Net Operating Profit after Taxes (NOPAT)

Vertex Pharmaceuticals Inc., NOPAT calculation

US$ in thousands

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net income (loss) attributable to Vertex
Deferred income tax expense (benefit)1
Increase (decrease) in equity equivalents2
Interest expense
Interest expense, operating lease liability3
Adjusted interest expense
Tax benefit of interest expense4
Adjusted interest expense, after taxes5
Interest income
Investment income, before taxes
Tax expense (benefit) of investment income6
Investment income, after taxes7
Net income (loss) attributable to noncontrolling interest
Net operating profit after taxes (NOPAT)

Based on: 10-K (filing date: 2020-02-13), 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-16).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to Vertex.

3 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =

4 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =

5 Addition of after taxes interest expense to net income (loss) attributable to Vertex.

6 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =

7 Elimination of after taxes investment income.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Vertex Pharmaceuticals Inc.’s NOPAT increased from 2017 to 2018 and from 2018 to 2019.

Cash Operating Taxes

Vertex Pharmaceuticals Inc., cash operating taxes calculation

US$ in thousands

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Provision for (benefit from) income taxes
Less: Deferred income tax expense (benefit)
Add: Tax savings from interest expense
Less: Tax imposed on investment income
Cash operating taxes

Based on: 10-K (filing date: 2020-02-13), 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-16).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Vertex Pharmaceuticals Inc.’s cash operating taxes decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Invested Capital

Vertex Pharmaceuticals Inc., invested capital calculation (financing approach)

US$ in thousands

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Senior secured term loan, current portion
Credit facility
Current finance lease liabilities
Long-term finance lease liabilities
Senior secured term loan, excluding current portion
Operating lease liability1
Total reported debt & leases
Total Vertex shareholders’ equity
Net deferred tax (assets) liabilities2
Equity equivalents3
Accumulated other comprehensive (income) loss, net of tax4
Noncontrolling interest
Adjusted total Vertex shareholders’ equity
Marketable securities5
Invested capital

Based on: 10-K (filing date: 2020-02-13), 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-16).

1 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of equity equivalents to total Vertex shareholders’ equity.

4 Removal of accumulated other comprehensive income.

5 Subtraction of marketable securities.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Vertex Pharmaceuticals Inc.’s invested capital increased from 2017 to 2018 and from 2018 to 2019.

Cost of Capital

Vertex Pharmaceuticals Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term obligations3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (filing date: 2020-02-13).

1 US$ in thousands

2 Equity. See details »

3 Long-term obligations. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term obligations3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (filing date: 2019-02-13).

1 US$ in thousands

2 Equity. See details »

3 Long-term obligations. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term obligations3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (filing date: 2018-02-15).

1 US$ in thousands

2 Equity. See details »

3 Long-term obligations. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term obligations3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (filing date: 2017-02-23).

1 US$ in thousands

2 Equity. See details »

3 Long-term obligations. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term obligations3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (filing date: 2016-02-16).

1 US$ in thousands

2 Equity. See details »

3 Long-term obligations. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Vertex Pharmaceuticals Inc., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in thousands)
Economic profit1
Invested capital2
Performance Ratio
Economic spread ratio3
Benchmarks
Economic Spread Ratio, Competitors4
Abbott Laboratories
AbbVie Inc.
Allergan PLC
Amgen Inc.
Biogen Inc.
Bristol-Myers Squibb Co.
Eli Lilly & Co.
Gilead Sciences Inc.
Illumina Inc.
Johnson & Johnson
Merck & Co. Inc.
Pfizer Inc.
Regeneron Pharmaceuticals Inc.
Zoetis Inc.

Based on: 10-K (filing date: 2020-02-13), 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-16).

1 Economic profit. See details »

2 Invested capital. See details »

3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Vertex Pharmaceuticals Inc.’s economic spread ratio improved from 2017 to 2018 and from 2018 to 2019.

Economic Profit Margin

Vertex Pharmaceuticals Inc., economic profit margin calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in thousands)
Economic profit1
Revenues
Performance Ratio
Economic profit margin2
Benchmarks
Economic Profit Margin, Competitors3
Abbott Laboratories
AbbVie Inc.
Allergan PLC
Amgen Inc.
Biogen Inc.
Bristol-Myers Squibb Co.
Eli Lilly & Co.
Gilead Sciences Inc.
Illumina Inc.
Johnson & Johnson
Merck & Co. Inc.
Pfizer Inc.
Regeneron Pharmaceuticals Inc.
Zoetis Inc.

Based on: 10-K (filing date: 2020-02-13), 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-16).

1 Economic profit. See details »

2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenues
= 100 × ÷ =

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Vertex Pharmaceuticals Inc.’s economic profit margin improved from 2017 to 2018 and from 2018 to 2019.