Pfizer Inc. (PFE)

Equity
US
Healthcare

RISK

RETURN

Key risk factors

Negligible price volatility

Strong trading liquidity

Strong & resilient to price shocks

Key return factors

Excellent dividends

Weak growth

Somewhat favourable analyst view

Company profilePfizer Inc. discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. It offers medicines and vaccines in various therapeutic areas, including cardiovascular metabolic and women's health under the Premarin family and Eliquis brands; biologics, small molecules, immunotherapies, and biosimilars under the Ibrance, Xtandi, Sutent, Inlyta, Retacrit, Lorbrena, and Braftovi brands; and sterile injectable and anti-infective medicines, and oral COVID-19 treatment under the Sulperazon, Medrol, Zavicefta, Zithromax, Vfend, Panzyga, and Paxlovid brands. The company also provides medicines and vaccines in various therapeutic areas, such as pneumococcal disease, meningococcal disease, tick-borne encephalitis, and COVID-19 under the Comirnaty/BNT162b2, Nimenrix, FSME/IMMUN-TicoVac, Trumenba, and the Prevnar family brands; biosimilars for chronic immune and inflammatory diseases under the Xeljanz, Enbrel, Inflectra, Eucrisa/Staquis, and Cibinqo brands; and amyloidosis, hemophilia, and endocrine diseases under the Vyndaqel/Vyndamax, BeneFIX, and Genotropin brands. In addition, the company is involved in the contract manufacturing business. It serves wholesalers, retailers, hospitals, clinics, government agencies, pharmacies, and individual provider offices, as well as disease control and prevention centers. The company has collaboration agreements with Bristol-Myers Squibb Company; Astellas Pharma US, Inc.; Myovant Sciences Ltd.; Akcea Therapeutics, Inc; Merck KGaA; Valneva SE; BioNTech SE; and Arvinas, Inc. Pfizer Inc. was founded in 1849 and is headquartered in New York, New York.

Valuation: Fairly valued

Multiple

TTM

NTM

P/E

-530.20

11.70

PEG

-37.40

P/B

1.70

1.50

P/S

2.90

2.60

P/FCF

30.80

9.40

EV/EBITDA

27.20

11.10

Based on key historical and expected multiples, the stock is fairly valued relative to its peers. Specifically, the stock is cheap' on P/E, neutral on EV/EBITDA, reasonably priced on P/FCF.

Performance: Mixed

The stock's performance has been mixed in the past six months, with growth following a decline. The stock has outperformed its global peers from the same sector and industry (as shown above), surpassing them by 4ppts in total. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

Analyst view: Somewhat favourable

The average target price is 31 and suggests 12% upside potential. Usually, this means a HOLD recommendation among investment firms. This neutral recommendation suggests no significant price movement, up or down, in the next 12 months. The most optimistic analyst has a target price of 45.0. This translates into 61% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 27.0. This is equivalent to 4% downside potential in the worst case.

Profitability: Average

RoE

Pfizer Inc. reported a return on equity (RoE) of -0.3% in the last 12 months, down from 2.3% in FY23. The market consensus projects an RoE of 6.4% in FY24, again behind its peers.

RoA

Another important profitability metric, return on assets (RoA), amounted to -0.1% in the last 12 months, a decrease from 1.0% in FY23. The market analysts predict that RoA will be 2.7% in FY24, again weaker than its peers.

RoCE

In the last 12 months, the return on capital employed (RoCE) declined to -0.2%, below the peers. The consensus estimate for FY24 for RoCE is 6.1%, again behind the peers.

Net margin

EBITDA margin

Historically, PFE has reported good net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled -0.5%, down from 3.6% in FY23. The company has reported average EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 15.1% in the last 12 months, a decline from 16.9% in FY23.

RoIC / WACC = 1.2(average value creation)

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.2 in the past several years. This ratio implies a average shareholder value creation.

Growth: Weak

Revenue

EBITDA

EPS

Free cash flow

PFE reported revenue of USD 55 094mn in the last 12 months, down 6% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. Market expects EPS to reach USD 2.34825 in FY24.Revenue has been growing very slowly over the past several years (middle negative), while EBITDA has declined rapidly trend in recent years (strongly negative). Net income has fallen rapidly in recent years (strongly negative). Free cash flow has naturally followed the declining EBITDA. We emphasize the highly volatile dynamics of all key metrics. This is an extremely negative factor.

Dividends: Excellent

Dividend paid

Dividend yield

The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, and there is an evident trend. In the past 12 months, the dividend yield has been outstanding and can be rated excellent compared to its peers. At the same time, the average five-year yield has been significantly higher and exceeded nearly all its peers. On average, the company pays dividends quarterly, which may appeal to investors valuing a regular income stream.

Default risk: Considerable

The risk of default is high. Among the negative credit factors and we point to slow historical revenue growth, and negligible return on capital. We note robust profitability and adequate interest coverage, among the positive credit factors.

Volatility: Negligible

In normal market circumstances, PFE is not volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will stay within a narrow range. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to negligible. We would also like to highlight the negligible intraday volatility of the instrument.

Stress-test: Negligible

In highly turbulent market conditions, PFE is not volatile. In other words, the stock will fall far less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be very low.

Selling difficulty: Very low

PFE boasts very high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually very stable and remains extremely favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions.

Country risk: Very low

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

Other risks: Negligible

No other major risks have been identified.