Pharma giant Pfizer Inc. (PFE) has paid dividends for 12 consecutive years. Its dividend payouts have increased at a 5.5% CAGR over the past five years. Its current dividend yield is 3.79%, while its four-year average yield is 3.63%.
Moreover, the stock beat consensus EPS estimates by 9.3% in the quarter that ended in December 2022. Analysts expect its EPS to grow 10.7% year-over-year to $3.84 in 2024.
In addition, David Denton, Chief Financial Officer, and Executive Vice President said, "Looking forward to 2023, we expect strong topline growth of 7% to 9%, excluding our COVID-19 products and anticipated foreign exchange impacts.
He added, "We are also increasing our investments behind our launch products and pipeline in order to help realize our growth goals for 2023 and beyond." Also, the Global Pharmaceutical market is expected to grow at a CAGR of 5.3% until 2028. PFE appears to be well-settled for the long haul.
While PFE has lost 9.5% over the past month and 13% over the past year to close the last trading session at $43.32, Wall Street analysts expect the stock to hit $50.14 soon, indicating a potential upside of 15.7%.
Here is what could shape PFE's performance in the near term:
Solid Financials
PFE's revenues came in at $24.29 billion for the 2022 fourth quarter, up marginally year-over-year. Its non-GAAP net income increased 44.2% year-over-year to $6.55 billion, while its non-GAAP EPS came in at $1.14, up 44.3% year-over-year. Moreover, its income from operations came in at $5 billion, representing a 39.7% year-over-year increase.
Attractive Valuations
PFE's forward P/E of 15.73x is 39.9% lower than the industry average of 26.18x. Its forward EV/Sales of 3.47x is 14.2% lower than the industry average of 4.04x. Also, its forward EV/EBITDA of 8.25x is 40% lower than the industry average of 13.74x, while its forward Price/Sales of 3.45x is compared with the industry average of 4.68x.
Robust Profitability
PFE's trailing-12-month gross profit margin of 65.90% is 18.8% higher than the industry average of 55.48%. Its trailing-12-month EBITDA margin of 43.42% is substantially higher than the industry average of 3.73%. Its trailing-12-month net income margin of 31.27% compares with the industry average of a negative 5.61%.
Furthermore, its trailing-12-month ROCE, ROTC, and ROTA of 36.94%, 19.53%, and 16.06% are significantly higher than the negative industry averages of 39.69%, 22.12%, and 30.71%, respectively.
POWR Ratings Reflect Promising Outlook
PFE's overall rating of B equates to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different 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 lower-than-industry valuation multiples. It has a B grade for Quality, consistent with its higher-than-industry profitability margins.
In the 173-stock Medical - Pharmaceuticals industry, PFE is ranked #26. Click here for the additional POWR Ratings for PFE (Growth, Momentum, Stability, and Sentiment).
View all the top stocks in the Medical - Pharmaceuticals industry here.
Bottom Line
PFE possesses robust fundamentals, and the stock is expected to soar in the near term. The stock looks undervalued at its current price level. With a colossal market capitalization of $243.17 billion, this pharma giant might be an ideal buy.
How Does Pfizer Inc. (PFE) Stack up Against Its Peers?
While PFE has an overall POWR Rating of B, one might consider looking at its industry peers, Novo Nordisk A/S (NVO), Novartis AG (NVS), and Astellas Pharma Inc. (ALPMY), which have an overall A (Strong Buy) rating.
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PFE shares were trading at $42.94 per share on Thursday morning, down $0.38 (-0.88%). Year-to-date, PFE has declined -15.43%, versus a 6.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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