Pfizer Inc (PFE) Valuation

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Company Profile (obtained from Google Finance): Pfizer Inc. (Pfizer) is a research-based, global pharmaceutical company. The Company discovers, develops, manufactures and markets prescription medicines for humans and animals. It operates in two business segments: Pharmaceutical and Animal Health. Pfizer also operates several other businesses, including the manufacture of gelatin capsules, contract manufacturing and bulk pharmaceutical chemicals. In June 2008, Pfizer completed the acquisition of all remaining outstanding shares of common stock of Encysive Pharmaceuticals, Inc. through a merger of Pfizer’s wholly owned subsidiary, Explorer Acquisition Corp., with and into Encysive. In June 2008, it also completed the acquisition of Serenex, Inc., a biotechnology company with a Heat Shock Protein 90 development portfolio. In January 2008, the Company completed the acquisition of Coley Pharmaceutical Group, Inc., a company whose area of capability is immunotherapy with emphasis on Toll-like receptor research and development.

ModernGraham Comments: None at this time.

Defensive and Enterprising Investor Tests:

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 6/7

1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
6. Moderate PEmg ratio – PEmg is less than 20 – PASS
7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests: Score = 5/5

1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
3. Earnings Stability – positive earnings per share for at least 5 years – PASS
4. Dividend Record – currently pays a dividend – PASS
5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary:

• Last Updated    12/29/2009
• MG Value    $22
• MG Opinion    Fairly Valued
• Value Based on 3% Growth    $19
• Value Based on 0% Growth    $11
• Market Implied Growth Rate    2.70%
• Net Current Asset Value (NCAV)    -$0.17
• PEmg    13.91
• Current Ratio    3.08
• PB Ratio    2.26

Key Data:

Balance Sheet – 9/27/2009

• Current Assets    $73,784,000,000
• Current Liabilities    $23,992,000,000
• Total Debt    $32,402,000,000
• Total Assets    $141,294,000,000
• Intangible Assets    $16,125,000,000
• Goodwill    $21,796,000,000
• Total Liabilities    $75,137,000,000
• Outstanding Shares    8,069,540,000

Earnings Per Share – Diluted

• 2009 (estimate)    $1.53
• 2008    $1.19
• 2007    $1.18
• 2006    $1.52
• 2005    $1.03
• 2004    $1.44
• 2003    $0.22
• 2002    $1.47
• 2001    $1.18
• 2000    $0.56
• 1999    $0.79

Earnings Per Share – Modern Graham

• 2009 (estimate)    $1.33
• 2008    $1.25
• 2007    $1.21
• 2006    $1.20
• 2005    $1.05
• 2004    $1.03

Valuation History:

• 12/29/09 – Value $22, Actual Price $18.56, Fairly Valued & Defensive
• 9/25/09 – Value $25, Actual Price $16.53, Undervalued & Defensive
• 7/17/09 – Value $28, Actual Price $14.96, Undervalued & Defensive