Pfizer Inc (PFE, Financial) saw a daily gain of 2.32%, but a 3-month loss of -6.51%. With an Earnings Per Share (EPS) of 3.76, the question arises: Is this stock significantly undervalued? This article aims to provide an in-depth valuation analysis of Pfizer (PFE), encouraging readers to delve deeper into the company's financial health and prospects.
Company Introduction
Pfizer is one of the world's largest pharmaceutical firms, with annual sales close to $50 billion, excluding COVID-19 product sales. Historically, Pfizer sold many types of healthcare products and chemicals. However, prescription drugs and vaccines now account for the majority of sales. Top sellers include pneumococcal vaccine Prevnar 13, cancer drug Ibrance, and cardiovascular treatment Eliquis. Pfizer operates globally, with international sales representing close to 50% of its total sales. Within international sales, emerging markets are a major contributor.
Summarizing GF Value
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at. It is calculated based on three factors:
- Historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow) that the stock has traded at.
- GuruFocus adjustment factor based on the company's past returns and growth.
- Future estimates of the business performance.
We believe the GF Value Line is the fair value that the stock should be traded at. The stock price will most likely fluctuate around the GF Value Line. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
The stock of Pfizer (PFE, Financial) is believed to be significantly undervalued based on GuruFocus' valuation method. GF Value estimates the stock's fair value based on three key factors: historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. If the share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. On the other hand, if the share price is significantly below the GF Value calculation, the stock may be undervalued and have higher future returns. At its current price of $ 33.94 per share, Pfizer stock is believed to be significantly undervalued.
Because Pfizer is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength
Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to understand its financial strength. Pfizer has a cash-to-debt ratio of 0.69, which ranks worse than 55.05% of 1039 companies in the Drug Manufacturers industry. The overall financial strength of Pfizer is 6 out of 10, which indicates that the financial strength of Pfizer is fair.
This is the debt and cash of Pfizer over the past years: 
Profitability and Growth
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. Pfizer has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $77.90 billion and Earnings Per Share (EPS) of $3.76. Its operating margin is 30.09%, which ranks better than 94.86% of 1031 companies in the Drug Manufacturers industry. Overall, GuruFocus ranks the profitability of Pfizer at 9 out of 10, which indicates strong profitability.
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term stock performance of a company. A faster growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Pfizer is 34.4%, which ranks better than 90.61% of 916 companies in the Drug Manufacturers industry. The 3-year average EBITDA growth rate is 29.6%, which ranks better than 76.65% of 878 companies in the Drug Manufacturers industry.
ROIC vs WACC
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Pfizer's return on invested capital is 13.17, and its cost of capital is 7.22.
The historical ROIC vs WACC comparison of Pfizer is shown below: 
Conclusion
In conclusion, the stock of Pfizer (PFE, Financial) is believed to be significantly undervalued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 76.65% of 878 companies in the Drug Manufacturers industry. To learn more about Pfizer stock, you can check out its 30-Year Financials here.
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