Over the 3-day weekend I was analyzing charts and noticed an ascending triangle pattern in Vertex Pharmaceuticals Inc.’s (VRTX) chart. This is a bullish pattern, which means the stock could soon experience a breakout.
VRTX discovers and develops small-molecule drugs for the treatment of serious diseases. Its key drugs are Kalydeco, Orkambi, Symdeko, and Trikafta for cystic fibrosis, where its therapies are the standard of care globally.
The company’s sales last year were driven by a fast adoption of Trikafta. The drug holds the key to VRTX’s long-term growth as it has the potential to treat close to 90% of cystic fibrosis patients. The company has consistently received regulatory approvals for the drug that has expanded its eligible population.
VRTX currently has a current ratio of 4.3, which indicates it has more than enough liquidity to handle short-term debt obligations. The company is also highly profitable with a net profit margin of 43.7%.
The company has seen both its revenue and earnings soar over the past year. Sales are up 28.8%, while earnings rose 78.5% over the past year. Even with all that growth, its stock is still trading at a reasonable valuation with a trailing P/E of 20.88 and a forward P/E of 18.83.
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Though the stock has shown mixed performance as it’s down 10% for the year, but has still shown a recent uptrend.
Take a look at the 1-year chart of VRTX below with my added notations:
Over the past two months, VRTX has repeatedly hit $220 as resistance (red), while also forming a clear trend line of support (green). Together, these two lines have created an ascending triangle on VRTX.
A long trade could be made on a break above the $220 resistance.
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Christian Tharp, CMT
VRTX shares rose $2.31 (+1.08%) in premarket trading Monday. Year-to-date, VRTX has declined -8.88%, versus a 8.23% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp
I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing. More...
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