Comparing Valuation And Performance: Vertex Pharmaceuticals Incorporated (VRTX), Arbor Realty Trust, Inc. (ABR)

The shares of Vertex Pharmaceuticals Incorporated have increased by more than 19.85% this year alone. The shares recently went up by 0.94% or $1.68 and now trades at $179.61. The shares of Arbor Realty Trust, Inc. (NYSE:ABR), has jumped by 36.69% year to date as of 12/06/2018. The shares currently trade at $11.81 and have been able to report a change of -3.83% over the past one week.

The stock of Vertex Pharmaceuticals Incorporated and Arbor Realty Trust, Inc. were two of the most active stocks on Thursday. Investors seem to be very interested in what happens to the stocks of these two companies but do investors favor one over the other? We will analyze the growth, profitability, risk, valuation, and insider trends of both companies and see which one investors prefer.

Next 5Y EPS Growth: 54.43% versus 8.00%

When a company is able to grow consistently in terms of earnings at a high compound rate have the highest likelihood of creating value for its shareholders over time. Analysts have predicted that VRTX will grow it’s earning at a 54.43% annual rate in the next 5 years. This is in contrast to ABR which will have a positive growth at a 8.00% annual rate. This means that the higher growth rate of VRTX implies a greater potential for capital appreciation over the years.

Profitability and Returns

Growth alone cannot be used to see if the company will be valuable. Shareholders will be the losers if a company invest in ventures that aren’t profitable enough to support upbeat growth. In order for us to accurately measure profitability and return, we will be using the EBITDA margin and Return on Investment (ROI), which balances the difference in capital structure. VRTX has an EBITDA margin of 26.5%, this implies that the underlying business of ABR is more profitable. The ROI of VRTX is 8.80% while that of ABR is 2.90%. These figures suggest that VRTX ventures generate a higher ROI than that of ABR.

Cash Flow

The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, VRTX’s free cash flow per share is a positive 14.27, while that of ABR is negative -0.05.

Liquidity and Financial Risk

The ability of a company to meet up with its short-term obligations and be able to clear its longer-term debts is measured using Liquidity and leverage ratios. The debt ratio of VRTX is 0.20 compared to 4.85 for ABR. ABR can be able to settle its long-term debts and thus is a lower financial risk than VRTX.


VRTX currently trades at a forward P/E of 43.51, a P/B of 15.76, and a P/S of 16.18 while ABR trades at a forward P/E of 10.05, a P/B of 1.25, and a P/S of 2.14. This means that looking at the earnings, book values and sales basis, ABR is the cheaper one. It is very obvious that earnings are the most important factors to investors, thus analysts are most likely to place their bet on the P/E.

Analyst Price Targets and Opinions

The mistake some people make is that they think a cheap stock has more value to it. In order to know the value of a stock, there is need to compare its current price to its likely trading price in the future. The price of VRTX is currently at a -10.8% to its one-year price target of 201.36. Looking at its rival pricing, ABR is at a -1.99% relative to its price target of 12.05.

When looking at the investment recommendation on say a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell), VRTX is given a 1.80 while 2.70 placed for ABR. This means that analysts are more bullish on the outlook for ABR stocks.

Insider Activity and Investor Sentiment

Short interest or otherwise called the percentage of a stock’s tradable shares currently being shorted is another data that investors use to get a handle on sentiment. The short ratio for VRTX is 2.73 while that of ABR is just 10.36. This means that analysts are more bullish on the forecast for VRTX stock.


The stock of Arbor Realty Trust, Inc. defeats that of Vertex Pharmaceuticals Incorporated when the two are compared, with ABR taking 5 out of the total factors that were been considered. ABR happens to be more profitable, generates a higher ROI, has higher cash flow per share, higher liquidity and has a lower financial risk. When looking at the stock valuation, ABR is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for ABR is better on when it is viewed on short interest.

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