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Viatris Inc(VTRS-Q)

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If You'd Invested $25,000 in Viatris in 2020, This Is How Much You Would Have Today

Motley Fool - Fri Aug 11, 2023

Viatris (NASDAQ: VTRS) spun off from Pfizer and merged with Mylan back in 2020. It's a generic drugmaker with a diverse, global business that serves patients and customers in over 165 countries and territories. It has approximately 40 manufacturing facilities, which help it manufacture drugs that serve many therapeutic areas. That diversity should make this a fairly stable investment to hang on to.

However, you may be surprised at what your returns would have been if you bought and held shares of Viatris since it first came into existence.

The new entity began trading on Nov. 17, 2020

Viatris officially launched on Nov. 16, 2020. The following day it began trading under the ticker symbol VTRS. More than 60 million shares traded that day, with the stock price ranging between $15.30 and $17.93, closing at $16.34. If you'd invested $25,000 back then, you would have been able to acquire approximately 1,530 shares of the business -- assuming you bought the stock at around the closing price.

Today, unfortunately, the stock trades signuificantly lower than that. On Wednesday, shares of Viatris closed at a price of just $11.26. If you held on to that $25,000 investment until today, it would be worth approximately $17,230, down 31%. But a big part of the allure of holding onto Viatris stock is that it pays a dividend, which yields an impressive 4.3% -- that's almost three times the rate of the average S&P 500 stock, which pays just 1.5%.

When factoring in the company's dividend, Viatris' total returns are a bit better. But even that wouldn't be enough to lift the stock out of negative territory. When including the dividend, your original $25,000 investment would still only be worth around $18,820 by market close on Wednesday. By comparison, if you had put that money into the S&P 500, your investment would be far higher at around $32,280.

Why have investors been so bearish on Viatris?

Viatris does offer a high dividend yield, but beyond that, there isn't much else of a reason why you might be tempted to buy the healthcare stock.

For one, the company carries a lot of debt at a time when interest rates are high; that's not going to have investors feeling great about the business. Although it has been paying down its debt, it's still significant. As of the end of June, the company's long-term debt totaled $17.2 billion -- far higher than the value of its current assets ($9.8 billion). But that's still lower than the more-than-$18 billion in long-term debt that Viatris reported at the end of last year.

Another negative that hurts the stock is that the business struggles to generate growth. Although foreign exchange does weigh down its operations, even when factoring that out, Viatris' net sales of $3.9 billion this past quarter (for the period ending June 30) were still only up 1% when factoring that out along with divestitures. Top-selling cholesterol drug Lipitor reported $380 million last quarter, and that was down 6% year over year.

New product launches may help improve the growth rate in the future, but there's just not much for growth investors to get excited about here.

Should you buy Viatris stock?

Viatris is a deeply discounted stock that's trading at less than four times its estimated future earnings. Although the growth rate isn't great, the business is profitable, pays a high dividend, and it comes at an incredibly cheap valuation. For dividend investors, it's not a bad buy. As long as you aren't expecting huge growth from it and know what you're getting into, this could be a good stock to hold, particularly if Viatris continues to pay down its debt and works at improving its balance sheet.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends Viatris. The Motley Fool has a disclosure policy.

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