Pfizer Inc ($PFE) – Valuation May 2023
Company Profile (excerpt from Wikipedia):
Pfizer Inc. is an American multinational pharmaceutical and biotechnology corporation headquartered at The Spiral in Manhattan, New York City. The company was established in 1849 in New York by two German entrepreneurs, Charles Pfizer (1824–1906) and his cousin Charles F. Erhart (1821–1891).
Pfizer develops and produces medicines and vaccines for immunology, oncology, cardiology, endocrinology, and neurology. The company’s largest products by sales are the Pfizer–BioNTech COVID-19 vaccine ($37 billion in 2022 revenues), Nirmatrelvir/ritonavir ($18 billion in 2022 revenues), Apixaban ($6 billion in 2022 revenues), a pneumococcal conjugate vaccine ($6 billion in 2022 revenues), and Palbociclib ($5 billion in 2022 revenues). In 2022, 42% of the company’s revenues came from the United States, 8% came from Japan, and 50% came from other countries.
Pfizer was a component of the Dow Jones Industrial Average stock market index from 2004 to August 2020. The company ranks 43rd on the Fortune 500 and 43rd on the Forbes Global 2000.
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 | Current Market Cap | $209,745,990,000.00 | PASS |
| 2. Sufficiently Strong Financial Condition | Current Ratio > 2 | Current Assets | $50,078,000,000.00 | |
| Current Liabilities | $36,562,000,000.00 | |||
| Current Ratio | 1.37 | FAIL | ||
| 3. Earnings Stability | Positive EPS for 10 years prior | Year | EPS | |
| 2022-12 | $5.47 | |||
| 2021-12 | $3.85 | |||
| 2020-12 | $1.63 | |||
| 2019-12 | $2.82 | |||
| 2018-12 | $1.87 | |||
| 2017-12 | $3.52 | |||
| 2016-12 | $1.17 | |||
| 2015-12 | $1.11 | |||
| 2014-12 | $1.42 | |||
| 2013-12 | $3.19 | |||
| Years Positive | 10 | PASS | ||
| 4. Dividend Record | Dividend Payments for 10 years prior | Year | Dividend | |
| 2022-12 | $1.60 | |||
| 2021-12 | $1.56 | |||
| 2020-12 | $1.52 | |||
| 2019-12 | $1.44 | |||
| 2018-12 | $1.36 | |||
| 2017-12 | $1.28 | |||
| 2016-12 | $1.20 | |||
| 2015-12 | $1.12 | |||
| 2014-12 | $1.04 | |||
| 2013-12 | $0.96 | |||
| Years With Payments | 10 | PASS | ||
| 5. Earnings Growth | Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end | |||
| Beginning Average | $1.91 | |||
| End Average | $3.65 | |||
| Growth | 91.43% | PASS | ||
| 6. Moderate PEmg Ratio | PEmg < 20 | Price | $37.16 | |
| EPSmg | $3.61 | |||
| PEmg | 10.28 | PASS | ||
| 7. Moderate Price to Assets | PB Ratio < 2.5 OR PB*PEmg < 50 | Price | $37.16 | |
| Book Value | $17.89 | |||
| PB Ratio | 2.08 | |||
| PB*PEmg | 21.36 | PASS | ||
| Total Score | 6 | |||
| Suitable for Defensive Investors? | YES | |||
| 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 | Current Assets | $50,078,000,000.00 | |
| Current Liabilities | $36,562,000,000.00 | |||
| Current Ratio | 1.37 | FAIL | ||
| 2. Sufficiently Strong Financial Condition | Debt to NCA < 1.1 | Total Debt | $30,738,000,000.00 | |
| Current Assets | $50,078,000,000.00 | |||
| Current Liabilities | $36,562,000,000.00 | |||
| Net Current Assets | $13,516,000,000.00 | |||
| Debt to NCA | 2.27 | FAIL | ||
| 3. Earnings Stability | Positive EPS for 5 years prior | Year | EPS | |
| 2022-12 | $5.47 | |||
| 2021-12 | $3.85 | |||
| 2020-12 | $1.63 | |||
| 2019-12 | $2.82 | |||
| 2018-12 | $1.87 | |||
| Years Positive | 5 | PASS | ||
| 4. Dividend Record | Currently Pays Dividend | Dividend | $1.60 | PASS |
| 5. Earnings Growth | EPSmg greater than 5 years ago | EPSmg – Current | $3.68 | |
| EPSmg – Prior | $2.04 | |||
| Growth | 80.35% | PASS | ||
| Total Score | 3 | |||
| Suitable? | YES | |||
Stage 2: Determination of Intrinsic Value
| MG Value Formula | ||||
| Value = EPSmg * (8.5+2g) |
| Calculating MG Value | |
| EPSmg | $3.61 |
| MG Growth Estimate | 7.85% |
| MG Value | $87.44 |
| Net Current Asset Value | -$7.74 |
| MG Value based on 3% Growth | $52.40 |
| MG Value based on 0% Growth | $30.72 |
| Market Implied Growth Rate | 0.89% |
| MG Opinion | |
| Current Price | $37.16 |
| % of Intrinsic Value | 42.50% |
| Opinion | Undervalued |
| MG Grade | |
| Factor | Score |
| Investor Suitability | 2.0 |
| Good Price to Value? | 1.0 |
| Trading Below Graham Number? | 0.0 |
| Long-term Dividend Growth? | 0.0 |
| Dividend Yield Above 2%? | 0.5 |
| PEmg Below Industry Average? | 0.5 |
| Trading Below NCAV? | 0.0 |
| Total Score | 4.0 |
| MG Grade | B+ |
Pfizer Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor’s only concern is the current ratio is below the Defensive Investor’s requirement of 2.0, but that is not enough to disqualify the company from the Defensive Investor’s requirements. The Enterprising Investor is concerned with the low current ratio and the high debt to net current assets; however, because the company is suitable for the Defensive Investor it is by default also suitable for the Enterprising Investor. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.37 in 2019 to an estimated $3.61 for 2023. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.89% 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.
At the time of valuation, further research into the company revealed the company was trading just above its Graham Number of $34.40. The company pays a dividend yield of 4.37%, which is among the highest dividend yields in the MG Universe. Its PEmg (price over earnings per share – ModernGraham) was 10.28, which was below the industry average of 44.82, which by some methods of valuation makes it one of the most undervalued stocks in its industry.
Pfizer Inc fares extremely well in the ModernGraham grading system, scoring a B+.
Stage 3: Information for Further Research
| Other Useful Information | |
| Current Ratio | 1.37 |
| PB Ratio | 2.08 |
| Dividend Yield | 4.37% |
| Number of Consecutive Years of Dividend Growth | 13 |
| 10-Year Share Buy-back Ratio | 2.2 |
| 5-Year Share Buy-back Ratio | 1.0 |
| 1-Year Share Buy-back Ratio | 0.1 |
| Insider buys – past 3 months | 1 |
Most Recent Balance Sheet Figures
| Balance Sheet | Date |
| Total Current Assets | $50,078,000,000.00 |
| Total Current Liabilities | $36,562,000,000.00 |
| Long Term Debt | $30,738,000,000.00 |
| Total Assets | $195,617,000,000.00 |
| Intangible Assets | $93,477,000,000.00 |
| Total Liabilities | $94,381,000,000.00 |
| Shares Outstanding (diluted) | 5,727,000,000.00 |
Earnings Per Share History
| Earnings | ||
| Year | EPS (diluted) | EPSmg |
| Estimated-Next FY | $2.94 | $3.61 |
| 2022-12 | $5.47 | $3.68 |
| 2021-12 | $3.85 | $2.77 |
| 2020-12 | $1.63 | $2.22 |
| 2019-12 | $2.82 | $2.37 |
| 2018-12 | $1.87 | $2.04 |
| 2017-12 | $3.52 | $2.11 |
| 2016-12 | $1.17 | $1.52 |
| 2015-12 | $1.11 | $1.73 |
| 2014-12 | $1.42 | $1.95 |
| 2013-12 | $3.19 | $2.05 |
| 2012-12 | $1.94 | $1.43 |
| 2011-12 | $1.27 | $1.18 |
| 2010-12 | $1.02 | $1.24 |
| 2009-12 | $1.23 | $1.39 |
| 2008-12 | $1.20 | $1.49 |
| 2007-12 | $1.17 | $1.55 |
| 2006-12 | $2.66 | $1.64 |
| 2005-12 | $1.09 | $1.14 |
| 2004-12 | $1.49 | $1.13 |
| 2003-12 | $0.54 | $0.94 |
| 2002-12 | $1.46 | $1.08 |
| 2001-12 | $1.22 | $0.85 |
| 2000-12 | $0.59 | $0.66 |
| 1999-12 | $0.78 | $0.66 |
| 1998-12 | $0.73 | $0.57 |
| 1997-12 | $0.56 | $0.46 |
| 1996-12 | $0.50 | N/A |
| 1995-12 | $0.42 | N/A |
| 1994-12 | $0.35 | N/A |
| 1993-12 | $0.17 | N/A |
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. 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.
