With value investing gaining traction amid volatile market conditions, investors could consider adding attractively valued shares of fundamentally strong, profitable businesses. At the current price level, I think Pfizer Inc. (PFE) is one of the best value stocks for reasons explained throughout this article.
2022 was a record-breaking year for PFE, with revenue and earnings per share reaching all-time highs. The company reported revenue of $100.33 billion, up 23% year-over-year. Its adjusted income increased 63% from the prior year to $37.72 billion, while its adjusted EPS was $6.58, an increase of 62% year-over-year.
During the full-year 2022, PFE deployed its capital in different ways, primarily the following two broad categories: reinvesting capital into initiatives intended to enhance the company’s growth prospects and returning capital directly to shareholders through a combination of share repurchases and cash dividends.
On December 9, 2022, PFE announced its regular quarterly dividend of $0.41 per share of common stock, payable on March 3, 2023. The first-quarter 2023 cash dividend will be the company’s 337th consecutive quarterly dividend.
Moreover, PFE has a record of raising dividends for 12 consecutive years. It pays a dividend of $1.64 per share annually, translating to a yield of 3.93% at the current price. Its 4-year average dividend yield is 3.64%. The company’s dividend payouts have increased at a 5.5% CAGR over the past five years.
Dr. Albert Bourla, Chairman and CEO of Pfizer, stated, “As we turn to 2023, we expect to once again set records, with potentially the largest number of new product and indication launches that we’ve ever had in such a short period of time.”
“We believe that the combination of these expected near-term launches, additional pipeline products that could potentially come to market in the medium-term, and anticipated contributions from business development, has the potential to set the company up for continued robust growth through the rest of this decade and beyond,” he added.
Shares of PFE have declined 6.2% over the past month to close the last trading session at $41.75. However, Wall Street analysts expect the stock to hit $50.14 in the next 12 months, indicating a potential upside of 20.1%.
Here is what could influence PFE’s performance in the upcoming months:
Positive Recent Developments
On February 22, 2023, PFE’s elranatamab received the U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA) filing acceptance. Elranatamab is an investigational B-cell maturation antigen (BCMA) CD3-targeted bispecific antibody (BsAb) for treating patients with relapsed or refractory multiple myeloma (RRMM).
Also, on February 21, PFE announced that the FDA had accepted Biologics License Application (BLA) for its respiratory syncytial virus (RSV) vaccine candidate PF-06928316 or RSVpreF.
“If approved, RSVpreF would help protect infants at their first breath from the devastating effects of this infectious disease, which though well-known, has been particularly evident throughout this RSV season,” said Annaliesa Anderson, Senior Vice President, and Chief Scientific Officer, Vaccine Research & Development, Pfizer.
On February 16, PFE announced positive results from the Phase 3 TALAPRO-2 study of TALZENNA, an oral poly ADP-ribose polymerase inhibitor, in combination with XTANDI, demonstrating a statistically significant and clinically meaningful improvement in radiographic progression-free survival.
Such developments in the company’s product line should boost its growth and profitability.
Robust Financials
For the fiscal fourth quarter that ended December 31, 2022, PFE’s revenues increased 1.9% year-over-year to $24.29 billion, reflecting 13% operational growth. Its income from continuing operations was $5 billion, up 39.7% year-over-year.
Furthermore, the company’s adjusted net income rose 44.2% year-over-year to $6.55 billion, while its adjusted EPS grew 44.3% year-over-year to $1.14.
Discounted Valuation
In terms of its forward non-GAAP P/E, PFE is trading at 11.77x, 39.8% lower than the industry average of 19.54x. Likewise, the stock’s forward EV/EBITDA multiple of 8.74 is 34% lower than the industry average of 13.25. And its forward EV/Sales of 3.56x is 8.5% lower than the industry average of 3.90x.
In addition, PFE’s forward Price/Sales of 2.33x is 42.7% lower than the 4.37x industry average, while its Price/Book multiple of 2.43 compares to the industry average of 2.57.
High Profitability
PFE’s trailing-12-month gross profit margin of 66.02% is 18.5% higher than the industry average of 55.70%. Its trailing-12-month EBITDA margin of 43.88% is significantly higher than the industry average of 3.73%. Also, the stock’s trailing-12-month net income margin of 31.27% compares to the negative industry average of 5.61%.
Moreover, PFE’s trailing-12-month ROCE, ROTC, and ROTA of 36.29%, 19.18%, and 15.91% compare to the respective negative industry averages of 39.86%, 22.11%, and 30.62%.
POWR Ratings Show Promise
PFE has an overall rating of B, translating to a Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. PFE has an A grade for Value, in sync with its reasonable valuation. Also, it has a B grade for Quality, consistent with its higher-than-industry profitability.
PFE is ranked #20 out of 173 stocks in the Medical-Pharmaceuticals industry.
Beyond what I have stated above, we have also given PFE grades for Sentiment, Growth, Momentum, and Stability. Get access to all PFE ratings here.
Bottom Line
PFE’s revenue has increased at a 34.9% CAGR over the past three years, while its net income and EPS have grown at CAGRs of 25.1% and 42.6%, respectively. Furthermore, the company has an optimistic outlook for 2023 and expects top-line growth of 7% to 9%, excluding its COVID-19 products and anticipated foreign exchange impacts.
The biopharmaceutical company is also increasing its investments in launching products and developing its pipeline to help realize its growth goal for this year and beyond. Given PFE’s solid financials, attractive valuation, high profitability, and promising growth prospects, it could be wise to keep this stock in your portfolio forever.
How Does Pfizer Inc. (PFE) Stack up Against Its Peers?
PFE has an overall POWR Rating of B. One could also check out these other stocks within the Medical-Pharmaceuticals industry with an A (Strong Buy) rating: Bristol-Myers Squibb Co. (BMY), Takeda Pharmaceutical Co. Ltd. (TAK), and Astellas Pharma Inc. (ALPMY).
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PFE shares were unchanged in premarket trading Monday. Year-to-date, PFE has declined -18.76%, versus a 4.46% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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