Amidst a daily loss of -5.12% and a 3-month decline of -18.15%, investors are closely scrutinizing Earnings Per Share (EPS) of $1.83 to determine if Pfizer Inc (PFE, Financial) is truly modestly undervalued. This article aims to explore Pfizer's valuation in detail, providing investors with a comprehensive understanding of the stock's potential. Read on for an in-depth analysis of Pfizer's intrinsic value and market prospects.
Company Introduction
Pfizer Inc (PFE, Financial) stands as one of the world's preeminent pharmaceutical giants, boasting annual sales nearing $50 billion. With a focus on prescription drugs and vaccines, Pfizer's top-selling products, such as Prevnar 13, Ibrance, and Eliquis, are distributed on a global scale. International sales contribute to nearly half of the total, with emerging markets playing a significant role. When juxtaposed with the GF Value of $37.44, Pfizer's current stock price of $28.91 suggests a modest undervaluation, warranting a closer look at its fair market value.
Summarize GF Value
The GF Value is a unique metric that encapsulates the intrinsic value of a stock, factoring in historical trading multiples, a GuruFocus adjustment for past performance and growth, and future business performance forecasts. According to this measure, Pfizer (PFE, Financial) is currently modestly undervalued. The GF Value Line serves as a benchmark, suggesting that the stock price will likely oscillate around this value point. A significant deviation below the GF Value Line indicates a stock that may be undervalued with higher potential returns, while a price well above it could signal overvaluation and poorer future returns. With Pfizer's shares trading below the GF Value, it implies a promising opportunity for long-term investment growth.
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Financial Strength
Evaluating a company's financial strength is crucial before investing. Companies with robust financial health are less likely to suffer permanent losses. Pfizer's cash-to-debt ratio of 0.7 falls below the median of the Drug Manufacturers industry, indicating fair financial strength with a score of 6 out of 10. Understanding the balance between debt and cash reserves is vital for assessing financial stability.
Profitability and Growth
Pfizer's profitability has been consistent over the past decade, with a strong operating margin of 15.44% that outperforms 75.36% of its industry peers. This profitability, coupled with a revenue growth rate of 34.4% over three years, places Pfizer among the top companies in its sector. The company's growth is also commendable, with a 3-year average EBITDA growth rate of 29.6%, ranking well within the industry.
ROIC vs WACC
Comparing Return on Invested Capital (ROIC) with the Weighted Average Cost of Capital (WACC) provides insight into a company's efficiency in generating cash flow relative to its invested capital. Pfizer's ROIC of 6.32 is slightly below its WACC of 7.12, suggesting challenges in creating shareholder value. This comparison is a critical aspect of assessing Pfizer's profitability.
Conclusion
In conclusion, Pfizer (PFE, Financial) appears modestly undervalued based on the GF Value, with fair financial health and strong profitability. Its growth prospects are promising, outpacing a significant portion of its industry counterparts. For those interested in a deeper dive into Pfizer's financials, the 30-Year Financials offer an extensive overview.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
