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Saturday, January 19, 2019

Pfizer Inc Valuation – February 2016 $PFE


Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – February 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Pfizer Inc (PFE) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Pfizer Inc. is a global biopharmaceutical company. The Company is engaged in discovering, developing and manufacturing of healthcare products. Its products include Lyrica, the Prevnar family of products, Enbrel, Celebrex, Lipitor, Viagra, Zyvox, Sutent, EpiPen, Toviaz, Tygacil, Rapamune, Xalkori, Inlyta, Norvasc, BeneFIX, Genotropin and Enbrel, among others. It operates in three segments: Global Innovative Pharmaceutical segment (GIP), Global Vaccines, Oncology and Consumer Healthcare segment (VOC) and Global Established Pharmaceutical segment (GEP). GIP is focused on developing, registering and commercializing medications in therapeutic areas, such as inflammation, cardiovascular/metabolic, neuroscience and pain, rare diseases and women’s/men’s health. VOC focuses on the development and commercialization of vaccines and products for oncology and consumer healthcare. GEP includes its sterile injectable products and bio similar development portfolio. Its subsidiary is Hospira, Inc.

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of PFE

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $176,483,365,247 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.62 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 24.65% Fail
6. Moderate PEmg Ratio PEmg < 20 14.93 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.67 Pass
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.62 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.69 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

PFE value chart February 2016

EPSmg $1.91
MG Growth Estimate 9.34%
MG Value $51.99
Opinion Undervalued
MG Value based on 3% Growth $27.74
MG Value based on 0% Growth $16.26
Market Implied Growth Rate 3.21%
Current Price $28.56
% of Intrinsic Value 54.94%

Pfizer Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio as well as the insufficient earnings growth over the last ten years.  The Enterprising Investor is only initially concerned by the level of debt relative to the net current assets.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.18 in 2011 to an estimated $1.91 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.21% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

Stage 3: Information for Further Research

PFE charts February 2016

Net Current Asset Value (NCAV) -$9.46
Graham Number $20.11
PEmg 14.93
Current Ratio 1.62
PB Ratio 2.67
Dividend Yield 3.85%
Number of Consecutive Years of Dividend Growth 5

 

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Useful Links:

ModernGraham tagged articles Morningstar
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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Sep2015
Total Current Assets $45,001,000,000
Total Current Liabilities $27,845,000,000
Long-Term Debt $29,079,000,000
Total Assets $170,867,000,000
Intangible Assets $90,514,000,000
Total Liabilities $104,029,000,000
Shares Outstanding (Diluted Average) 6,243,000,000

Earnings Per Share History

Next Fiscal Year Estimate $1.66
Dec2014 $1.42
Dec2013 $3.19
Dec2012 $1.94
Dec2011 $1.27
Dec2010 $1.02
Dec2009 $1.23
Dec2008 $1.20
Dec2007 $1.17
Dec2006 $2.66
Dec2005 $1.09
Dec2004 $1.49
Dec2003 $0.54
Dec2002 $1.46
Dec2001 $1.22
Dec2000 $0.59
Dec1999 $0.78
Dec1998 $0.73
Dec1997 $0.56
Dec1996 $0.50

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.91
Dec2014 $1.95
Dec2013 $2.05
Dec2012 $1.43
Dec2011 $1.18
Dec2010 $1.24
Dec2009 $1.39
Dec2008 $1.49
Dec2007 $1.55
Dec2006 $1.64
Dec2005 $1.14
Dec2004 $1.13
Dec2003 $0.94
Dec2002 $1.08
Dec2001 $0.85
Dec2000 $0.66
Dec1999 $0.63

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Companies for Enterprising Dividend Investors – November 2015
15 Best Stocks For Value Investors This Week – 9/12/15
Pfizer Inc Analysis – September 2015 Update $PFE
10 Undervalued Companies for the Enterprising Dividend Stock Investor – August 2015
The Best Companies of the Pharmaceuticals Industry – August 2015

Other ModernGraham posts about related companies

Biogen Inc Valuation – February 2016 Update $BIIB
Perrigo Co PLC Valuation – January 2016 Update $PRGO
Johnson & Johnson Valuation – January 2016 Update $JNJ
Mylan NV Valuation – January 2016 Update $MYL
Celgene Corp Valuation – December 2015 Update $CELG
Merck & Co Valuation – November 2015 Update $MRK
Zoetis Inc. Valuation – October 2015 Update $ZTS
Biogen Inc. Valuation – October 2015 Update $BIIB
Perrigo Company PLC Analysis – October 2015 Update $PRGO
Amgen Inc. Analysis – September 2015 Update $AMGN

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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