Investors evaluating Pfizer’s current stock performance are understandably seeking clarity on its valuation. Recent market activity shows a mixed picture, with short-term gains offset by longer-term declines. As of , Pfizer’s stock closed at $27.14, reflecting a 5.8% increase over the past 30 days and a 7.8% year-to-date rise. However, over the past year, the stock has seen an 8.9% return, while a three-year view reveals a 19.8% decline, and a five-year view shows a more modest 4.0% increase.
Recent discussion surrounding Pfizer centers on its evolving portfolio and pipeline, particularly as it moves beyond its prominent role in COVID-19 vaccines and treatments. This shift, coupled with investor sentiment regarding the company’s mix of established and developing therapies, is influencing market reactions. A valuation assessment by Simply Wall St currently gives Pfizer a score of 4 out of 6, signaling a need for a deeper dive into various valuation methods.
Discounted Cash Flow Analysis Suggests Undervaluation
A Discounted Cash Flow (DCF) analysis attempts to determine a company’s intrinsic value by projecting future cash flows and discounting them back to present value. For Pfizer, the model utilizes a two-stage free cash flow to equity approach, beginning with the last twelve months’ free cash flow of approximately $9.8 billion. Analyst forecasts are used for the near term, with Simply Wall St extrapolating projections to 2035, anticipating free cash flow to reach $16.9 billion.
When these projected cash flows are discounted and combined, the DCF model estimates an intrinsic value of $65.01 per share. Compared to the current share price of $27.14, this represents a substantial 58.3% discount, suggesting the stock may be currently undervalued based on its potential future cash flows.
Price-to-Earnings Ratio in Line with Industry
For established, profitable companies like Pfizer, the price-to-earnings (P/E) ratio is a common metric for assessing valuation. It indicates how much investors are willing to pay for each dollar of current earnings. Pfizer currently trades at a P/E ratio of 19.9x, which is close to the pharmaceutical industry average of 18.9x and the average P/E ratio of its peer companies, which is 20.7x. This suggests that, in a simple comparison, Pfizer’s valuation is broadly in line with its sector.
Simply Wall St also calculates a “fair ratio” for Pfizer, which is 24.6x. This metric considers factors such as earnings growth, profit margins, industry dynamics, market capitalization, and company-specific risks. Comparing the current P/E ratio of 19.9x to the fair ratio of 24.6x indicates that Pfizer’s P/E ratio is below this model-based benchmark, again suggesting potential undervaluation.
Narratives Offer a Range of Perspectives
Beyond quantitative analysis, Simply Wall St emphasizes the importance of considering different “narratives” – essentially, stories that combine views on Pfizer’s business with explicit forecasts for sales, profits, and margins. These narratives are linked to a fair value estimate, allowing investors to compare their own assumptions with those of others. Currently, Pfizer narratives range in fair value estimates, from around $23.00 to $34.98, reflecting differing assessments of factors like obesity drug development, patent expirations, and cost-reduction programs.
One bullish narrative estimates a fair value of $29.08 per share, approximately 6.7% above the last closing price of $27.14. This view relies on expansion in oncology, rare diseases, and vaccines, as well as the potential of obesity treatments, to offset patent expirations. Analysts projecting this scenario anticipate a modest decline in sales but improving margins, reaching approximately $12.8 billion in profits by 2028.
Conversely, a bearish narrative estimates a fair value of $23.00 per share, approximately 18.0% below the current price. This perspective focuses on the loss of exclusivity for key drugs like Eliquis and Ibrance, tighter global drug pricing, and increased competition from generics and biosimilars. Analysts supporting this view anticipate a steeper decline in sales and a lower fair value, reflecting concerns about the pipeline’s ability to fully offset patent cliffs.
these narratives provide a range of potential outcomes, allowing investors to weigh different perspectives and align their investment decisions with their own assumptions about Pfizer’s future.
This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using an unbiased methodology. Our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to provide you with long-term, fundamental-based analysis. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
