Pfizer Inc. (PFE) is a household name that requires no introduction. Its skyrocketing sales of vaccines and the COVID-19 tablet have led it to witness solid growth over the past year. In addition, the company also sells a range of blockbuster drugs, such as blood thinners, breast cancer medications, arthritis treatments, and pneumonia vaccinations.
The stock has gained 32.2% over the past year and 21.9% over the past nine months to close yesterday’s trading session at $52.31.
Last month, PFE and Valneva SE (VALN), a specialty French vaccine firm, signed an equity subscription deal. PFE will invest $95 million for an 8.1% stake in VALN as part of the arrangement, strengthening the two companies' strategic Lyme collaboration.
Also, Last week, PFE Inc announced that it is pursuing full U.S. clearance for Paxlovid, an oral COVID-19 antiviral medication that is presently accessible under an emergency use authorization (EUA). Pfizer said that it submitted a New Drug Application for Paxlovid to the Food and Drug Administration for the treatment of COVID-19 in vaccinated and unvaccinated patients at high risk of progressing to severe disease.
Here's what could shape PFE's performance in the near term:
Latest Development
Last month, PFE and BioNTech SE (BNTX) announced a new vaccine supply agreement with the US government to assist the ongoing COVID-19 battle. The US government will get 105 million doses (30 g, 10 g, and 3 g) under the terms of the arrangement. Adult Omicron-adapted COVID-19 vaccines may be included, subject to the US Food and Drug Administration (FDA) approval.
Also, last month, Roivant Sciences (ROIV) and PFE announced the formation of Priovant Therapeutics, which will focus on developing and commercializing innovative medicines for autoimmune illnesses with the highest morbidity and mortality. Priovant was formed in September 2021 due to a deal between ROIV and PFE, in which Pfizer licensed oral and topical brepocitinib's global development rights and commercial rights in the United States and Japan to Priovant. PFE has a 25 percent stock stake in Priovant.
Robust Financials
During the first quarter ended March 30, 2022, PFE's total revenue increased 77% year-over-year to $25.66 billion. Its income from continuing operations increased 61% year-over-year to $7.88 billion. The company's net income grew 61% from the year-ago value to $7.86 billion, while its EPS grew 59% from the prior-year quarter to $1.37.
Strong Profitability
PFE's trailing-12-months gross profit margin of 60.5% is 9.1% higher than the industry average of 55.5%. Also, its ROC, net income margin, and ROA of 17.6%, 27%, and 13.6% compare to the negative industry averages. Furthermore, its asset turnover ratio of 0.54% is 55.2% higher than the industry average of 0.35%.
Impressive Growth Prospects
Street expects PFE's revenues and EPS to rise 24.1% and 54.1% year-over-year to $103.83 billion and $6.81, respectively, in fiscal 2022. In addition, PFE’s EPS is expected to rise 79.4% and 39.6% in the current and next quarters, respectively.
Moreover, the company has an impressive earnings surprise history, as it topped Street EPS estimates in all of the trailing four quarters.
Discounted Valuation
In terms of forward Non-GAAP P/E, the stock is currently trading at 7.65x, 60.6% lower than the industry average of 19.43x. Also, its forward EV/Sales of 2.95x is 19.8% lower than the industry average of 3.68x. Moreover, PFE's forward Price/Sales of 2.83x is 36.4% lower than the industry average of 4.44x.
Consensus Rating and Price Target Indicate Potential Upside
Of the 15 Wall Street analysts that rated PFE, six rated it Buy, and nine rated it Hold. The 12-month median price target of $58.64 indicates a 12.1% potential upside. The price targets range from a low of $50.00 to a high of $76.00.
POWR Ratings Reflect Solid Prospects
PFE has an overall grade of A, equating to a Strong Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. PFE has a B grade for Quality, Growth, and Value. PFE's solid earnings and revenue growth potential is consistent with the Quality and Growth grade. In addition, the company's lower-than-industry multiples are in sync with the Value grade.
Of the 169 stocks in the F-rated Medical – Pharmaceuticals industry, PFE is ranked #4.
Beyond what I stated above, we have graded PFE for Sentiment, Stability, and Momentum. Get all PFE ratings here.
Bottom Line
PFE's robust financial performance in the last reported quarter and several strategic collaborations make it well-positioned to witness solid growth in the coming months. In addition, given the favorable analysts' sentiments and the company's several drug approvals and breakthroughs, the stock could soar in the near term. So, we think the stock could be a great bet now.
How Does Pfizer Inc. (PFE) Stack Up Against its Peers?
PFE has an overall POWR Rating of A, which equates to a Strong Buy rating. Check out these other stocks within the same industry with A (Strong Buy) ratings: Merck & Co. Inc. (MRK), Novartis AG (NVS), and Bristol-Myers Squibb Co. (BMY).
PFE shares were trading at $52.31 per share on Monday afternoon, down $0.12 (-0.23%). Year-to-date, PFE has declined -10.01%, versus a -19.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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