Amidst a challenging market, Pfizer Inc (PFE, Financial) has experienced a daily loss of 6.72% and a 3-month decline of 20.57%, leaving investors questioning the stock's valuation. With an Earnings Per Share (EPS) of $1.83, the question arises: is Pfizer (PFE) modestly undervalued? This article offers an in-depth valuation analysis to explore Pfizer's current market position and future prospects.
Company Introduction
Pfizer is one of the world's preeminent pharmaceutical firms, boasting annual sales nearing $50 billion, with a strong focus on prescription drugs and vaccines. The company's international presence is significant, with nearly half of its sales stemming from global markets, including substantial contributions from emerging economies. When juxtaposed with the GF Value, which estimates Pfizer's fair value at $36.9, the current stock price of $26.66 suggests that the company may indeed be undervalued. This valuation presents an opportunity for a deeper analysis of Pfizer's financial health and potential for growth.
Summarize GF Value
The GF Value is a unique metric that calculates the intrinsic value of a stock, factoring in historical trading multiples, a GuruFocus adjustment for past performance, and future business estimates. According to this measure, Pfizer (PFE, Financial) appears modestly undervalued. The GF Value Line suggests that the stock should ideally trade at its fair value. If a stock's price is substantially above this line, it may be overvalued, potentially leading to poor returns. Conversely, if it is below, the stock could be undervalued, indicating a likelihood of higher future returns. With a market cap of $150.50 billion, Pfizer's current price points to an undervaluation, hinting at a promising long-term return on the stock.
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Financial Strength
Investing in financially robust companies is crucial to minimize the risk of capital loss. Pfizer's cash-to-debt ratio of 0.7 ranks in the lower half compared to its industry peers, signaling a need for caution. Nevertheless, GuruFocus rates Pfizer's overall financial strength as fair, with a score of 6 out of 10. This assessment is vital for investors considering Pfizer's stock for their portfolios.
Profitability and Growth
Profitability is a key indicator of a company's risk profile. Pfizer has maintained profitability for the past decade, with an impressive operating margin of 15.44%, outperforming 75.58% of its industry counterparts. The company's profitability rank is deemed strong by GuruFocus. In terms of growth, Pfizer's revenue growth rate surpasses 90.83% of its industry peers, indicating a strong potential for value creation for shareholders.
ROIC vs WACC
Comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) provides further insight into profitability. Pfizer's ROIC over the past year is 6.32, slightly below its WACC of 6.47, suggesting a narrow margin for value creation. This comparison is crucial for understanding the company's financial performance relative to its capital costs.
Conclusion
In conclusion, Pfizer Inc (PFE, Financial) shows signs of being modestly undervalued. The company's financial condition is fair, and its profitability is robust, with growth rates that are commendable within the industry. For a comprehensive view of Pfizer's financials, interested investors can review the 30-Year Financials here.
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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.
