Pfizer Inc. does fairly well in the ModernGraham model, and is suitable for Enterprising Investors. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PB ratio, while the Enterprising Investor has no initial concerns. As a result, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.
When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $1.24 in 2010 to $1.95 for 2014. This is a strong level of demonstrated growth, which is well above the market’s implied estimate of 4.38% annual earnings growth over the next 7-10 years. Here, the historical growth in EPSmg over the last five years is around 11.41% per year. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.
Be sure to check out previous ModernGraham valuations of Pfizer Inc. (PFE)Â for a greater perspective!
Disclaimer: The author did not hold a position in Pfizer Inc. (PFE)Â at the time of publication and had no intention of changing that position within the next 72 hours. Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.