Biotech company Vertex Pharmaceuticals (VRTX +1.26%) has made for a solid investment over the past decade, more than quadrupling in value during that period. The stock generated fantastic returns for investors and this year it's also up around 20% as there's still ample bullishness around the business. The company is a leader in cystic fibrosis treatments with an eye for more growth and diversification in the long run.
Does Vertex have the potential to be a millionaire-making investment going forward?
Vertex generated consistent growth in recent quarters
The challenge for Vertex Pharmaceuticals will be to keep its growth rate strong. For the quarter ending June 30, the company's sales totaled $2.5 billion and were up 14% year over year. That revenue comes mainly from cystic fibrosis products, specifically Trikafta/Kaftrio, which generated over $2.2 billion.
Over the past three years, the company has averaged a solid 22% growth rate, although that has been trending downward in recent quarters.
VRTX Revenue (Quarterly YoY Growth) data by YCharts
This year, the company projects that its revenue could hit $9.8 billion, which would be 10% higher than the $8.9 billion it reported in 2022.
There are more catalysts ahead for Vertex
Vertex's growth rate could accelerate in the future as it's still in its early growth stages. One of the more promising products investors are waiting on is exa-cel, which it has been developing with CRISPR Therapeutics. The gene-editing therapy is awaiting regulatory approval and is a possible treatment for sickle cell disease and transfusion-dependent beta thalassemia. The Food and Drug Administration (FDA) has accepted a Biologics License Application for the therapy and has set a PDUFA date of Dec. 8. Exa-cel has the potential to be a blockbuster, generating more than $1 billion in revenue at its peak.
The company has even more in its pipeline, including pain medication VX-548, which is in phase 3 trials that should finish by the end of the year. Another promising treatment in late-stage trials is Inaxaplin. Vertex says it's the first medication that aims to treat the cause of APOL-1 mediated kidney disease, which can lead to kidney failure.
By diversifying its business beyond cystic fibrosis, Vertex will give itself more long-term growth opportunities to pursue, and that can be key to the stock generating strong returns for investors.
NASDAQ: VRTX
Key Data Points
Impressive financials could propel more growth
Another reason to be bullish on the company's long-term prospects is Vertex's sound financial performance. Last year, it generated $3.9 billion in free cash flow and in three years, it has accumulated $9.3 billion. It also enjoys a high profit margin of over 37% of revenue.
Billions in free cash and high profitability can accomplish multiple things for Vertex. First, as sales rise, so will the bottom line (thanks to that high profit margin), leading to a better price-to-earnings multiple, which should drive the stock price higher.
The second thing that it accomplishes is it gives Vertex plenty of cash on an ongoing basis to help fund the development of new treatments, or potentially seek out acquisitions to further diversify its operations. That, in turn, can also lead to more growth and profitability in the long run.
By having a robust business that is highly profitable and bringing in billions in free cash, Vertex can be a growth machine for years to come.
Can Vertex get your investment to $1 million?
There's significant growth potential for Vertex in the long run. Whether it can grow an investment to $1 million will ultimately depend on how much you invest and your holding period. On a $50,000 investment, Vertex would need to grow to 20 times its value to get to $1 million. If you invest $25,000, then you would need the stock to be a 40-bagger. If you only invest $5,000, then you're looking at a 200x return.
Today, Vertex's market cap is around $90 billion. Expecting it to grow to 200 times its value would mean the stock eventually hits a valuation of $18 trillion. While a lot can change over the years, that might be a bit too optimistic of a forecast for the business. If it's a 40-bagger, then it would need to reach a valuation of $3.6 trillion. Over a 25-year holding period that might be possible, as the stock would need to average returns of around 16%. It's a tall task given the long-run S&P 500 average is a 10% return. It's not impossible, but it's not easy, either.
Given Vertex's size and market cap, it's going to be a challenge for the stock to deliver the massive returns you would need to turn a small investment into $1 million. If you're willing to invest at least $25,000 and wait 25 years or more for the stock to grow, then it's possible your investment could reach $1 million. However, it's important to temper your expectations because while Vertex is an excellent growth stock, expecting a 200x return at its current valuation may be a bit unrealistic.
