Viatris Inc (VTRS)

Conclusion

Viatris Inc is a global healthcare company that develops and sells generic, branded and biosimilar medicines across North America, Europe, Asia, Latin America and other regions. The share price is 20.49 USD, giving a market capitalisation of 23.49 billion USD and an enterprise value of 35.17 billion USD.

The verdict is fair. The company trades at 12.3x EV/EBITDA against a ten-year median of 9.1x, and at 11.5x price to free cash flow against a median of 6.1x. The DCF gives 27.28 USD per share at a discount rate of 9.25%. The fair value band runs from 15.14 to 22.71 USD with a midpoint of 18.92 USD, a margin of safety of -7.65% at the current price. The reverse DCF implies growth of -0.04%, against revenue growth of 3.66% a year over five years and free cash flow per share growth of 12.56% a year over the same period.

The strongest support is the free cash flow yield of 8.69%, the Beneish M-score of -3.24 (reading unlikely manipulation) and seven beats in eight quarters of earnings surprises. The weakest numbers are interest coverage of 0.09, net debt to EBITDA of 4.09, and a return on invested capital of 0.13% against a WACC of 7.28%. Share count has risen at 14.26% a year over five years, which dilutes shareholders.

Financial health

Financial health is red: the current ratio of 1.55 is good, but net debt to EBITDA of 4.09, interest coverage of 0.09 and the Altman Z-score of 1.2 pull it down. The quick ratio is 0.80 and debt to equity is 0.99, both as at 30 September 2026. The Altman Z-score of 1.2 falls in the distress zone; the model was designed for manufacturers, and Viatris is a drug manufacturer, so the reading applies. Insolvency risk is low, about 1.6% by the estimate of the Ohlson model over one to two years, based on figures as at 31 December 2025. Interest coverage at 0.09 means operating earnings cover only a small fraction of interest costs, which is the main pressure on the balance sheet.

Earnings quality

Earnings quality is yellow: the Beneish M-score of -3.24 and the current earnings beats help it, while the rising share count and a Piotroski score of 5 out of 9 hold it back. Free cash flow after stock-based compensation is 1.87 billion USD on a trailing basis, and stock-based compensation is 1.19% of revenue. Free cash flow conversion is not available, as the underlying figures are not provided for either the trailing twelve months or five years. The accrual ratio is -0.15, which points to cash earnings running ahead of accounting earnings. Share count has grown at 14.26% a year over five years, so there have been no buybacks. The company beat earnings estimates in seven of eight quarters, with an average surprise of 8.13%. Analysts have cut the current-year estimate over the last 30 days, with three downgrades against one upgrade, while the next-year estimate was raised, with four upgrades against one downgrade.

Profitability

Profitability is red, with all four measured signals assessed as weak. The gross margin is 35.22% against a ten-year median of 36.61%. The operating margin is -0.53% against a median of 5.59%, and the net margin is -4.13% against a median of 0.25%. Return on invested capital is 0.13% against a WACC of 7.28%, and the given difference between them is -7.15%, so the company currently earns less than its cost of capital. The five-year median ROIC is -0.05%. Return on equity is -4.44%. The DuPont split shows a net margin of -24.58%, an asset turnover of 0.38 and an equity multiplier of 2.53, so leverage magnifies a weak margin and low turnover. These figures are as at 31 December 2025, except where stated otherwise.

Growth

Growth is yellow, with three neutral readings and no good or bad ones. Revenue compounded at -4.2% over three years, 3.66% over five years and 4.25% over ten years. Revenue grew in five of the last ten years. Free cash flow per share fell at 7.07% a year over three years and 6.69% a year over ten years, but rose at 12.56% a year over five years. The next-year earnings estimate implies growth of 6.16%. The three-year decline is the key concern, since it shows that revenue has been shrinking recently even though the longer-term record is positive. Growth should therefore be judged on the recovery of the last two years, not on the ten-year trend.

Valuation

Valuation is yellow, with the verdict neutral. Current multiples sit above their ten-year medians: EV/EBITDA of 12.33x against 9.11x (a premium of 35.36%), price to free cash flow of 11.51x against 6.07x (a premium of 89.68%), and price to sales of 1.60x against 0.81x. The discounted cash flow gives 27.28 USD per share at a discount rate of 9.25%, with a terminal share of 53.92%, which means the DCF rests heavily on the terminal value. The fair value from historical multiples is 10.57 USD. The fair value band runs from 15.14 to 22.71 USD, with a midpoint of 18.92 USD and a margin of safety of -7.65% at 20.49 USD. The dividend yield is 2.36%, and dividends absorb 27.19% of free cash flow. The fair value estimate rests on fixed assumptions, a 5% equity risk premium and capped growth, and is not a price target.

Risks

The weakest figures carry the main risks. Interest coverage of 0.09 leaves little room to absorb a fall in earnings, and net debt of 4.09 times EBITDA means a lower EBITDA would raise leverage quickly. A return on invested capital below the cost of capital means the business is currently destroying value, so growth alone will not lift the valuation. Continued dilution at 14.26% a year would erode per-share returns. The Altman Z-score of 1.2 sits in the distress zone and needs monitoring. The figures for free cash flow conversion are not available. The analysis has no debt maturity schedule and no revenue split by segment, so refinancing risk and the performance of each business line cannot be assessed. The tax rate of 21% is assumed rather than reported.