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Pfizer Stock: Discounted Valuation Multiples?

I am neutral on Pfizer (PFE) as it has a strong competitive position within the pharmaceutical and biotechnology industry, strong growth momentum, and discounted valuation multiples relative to the company’s trading history. On the other hand, the average price target implies weak upside potential over the next year.

Pfizer is a Fortune 500 company headquartered in New York, producing vaccines and medicines for cardiology, endocrinology, immunology, oncology, and neurology. The company was established in 1849 by Charles Pfizer and Charles F. Erhart, with plants producing fine chemicals. 

The company has its operations in several countries, which enable it to benefit from economic surges even when some markets may crash. Even though the company has seen its fair share of challenges from the United States (the biggest market for biopharmaceutical products), it has still managed to stay profitable.

Strengths

Pfizer is the 49th largest public company globally, and in 2021, it was also the second-largest pharmaceutical company in the world in terms of revenue.

One significant strength of Pfizer is its research potential and its ability to deliver faster than any other company. It spends around $8 billion per annum on research. The company leads the way in delivering vaccines across a wide range of fields. These fields are neurology, oncology, immunology, and cardiology.

Recent Results

Pfizer’s third-quarter 2021 revenues stood at $24.1 billion, which is a 130% growth. Its operational revenue grew by 7% and reached $11.1 billion. 

Diluted EPS for the third quarter of 2021 was $1.42, while the adjusted diluted EPS was $1.34. However, in the third quarter for 2021, the cost of sales was 41.4% of revenue, while in the same quarter in 2020, the cost of sales had a 19.5% share of revenue. 

The company also reported that its hospital-related products had shown an impressive growth of 29%. This growth was mainly driven by the company’s manufacturing activities.

Valuation Metrics

PFE stock looks very attractively priced at the moment. Its EV/EBITDA ratio is cheap relative to its history at 8.3 times compared to its historical average of 11 times. 

Furthermore, its P/E ratio is 10.3 times compared to its historic average of 12.9 times. 

Analysts expect the company to see revenue, EBITDA, and normalized earnings-per-share growth in 2022 of 18.8%, 43.7%, and 45.9%, respectively.

Wall Street’s Take

According to Wall Street analysts, PFE earns a Moderate Buy analyst consensus based on eight Buy ratings, 10 Hold Ratings and zero Sell ratings in the past three months. Additionally, the average Pfizer price target of $58.29 puts the upside potential at 4.6%.

Summary and Conclusions

Pfizer is a leading global biotech and pharmaceutical company that has a long and illustrious history of generating strong shareholder returns.

The stock looks attractively valued right now, and growth momentum is strong at the moment.

That said, Wall Street analysts are only moderately bullish on shares here and the average price target implies weak upside over the next year.

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