Each Tuesday we will do a detailed analysis of one of the companies in our valuation database. This week’s featured company is Pfizer Inc (PFE).
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.
Business and Management Review
1) Is the business simple and understandable?
Pfizer is one of the oldest and most successful pharmaceutical manufacturers in the world.Â The company's business strategy has long been simple and understandable:Â research, develop, and manufacture medicines and vitamins.Â In this type of business, one of the critical aspects is the research and development department - an area where Pfizer has thrived over the last 160+ years.Â Pfizer is the company that developed citric acid (major component of many sodas), penicillin, and more recently, Viagra.
2) Does the business have a consistent operating history?
Pfizer has a very consistent operating history.Â The business plan hasn't changed since the founding in 1849, and likely will not change in the future.Â Financially, the company has had a positive net income for over 10 years, and has paid a dividend for over 10 years.
3) Does the company have favorable long term prospects?
Out of all the companies we have analyzed, we believe that Pfizer may have the strongest long-term prospects.Â The industry itself will be around for all of human history, and as long as the company continues to have a research and development department with a strong budget, it is likely that the company will continue to perform well.Â The only threats to Pfizer likely come from the possibility of being surpassed by competitors which has the potential to put a damper on the growth of the company; however, there are a number of markets worldwide that can still benefit from the production of the company's products.Â As a result, any decrease in growth overall due to competition could be offset by growth in international sales.
4) Is management rational?
As long as the management continues to devote a significant portion of the budget to research and development, we believe the management will be behaving rationally.Â In addition, the company has a focused acquisition strategy that does not stray from the basic business plan of the company.
5) Is management candid with its shareholders?
Pfizer has a very nice website for shareholders that details the company's history, provides all the necessary investor information, and even includes a very detailed list of products in development.
Data of Interest
Our Valuation: You can view our quantitative valuation following Benjamin Graham's formula and guidelines from The Intelligent Investor on this page: Pfizer Inc (PFE) Valuation