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Can Pfizer (PFE) Prove to be an Apt Value Investment?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Pfizer, Inc. (PFE - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Pfizer has a trailing twelve months PE ratio of 14.8. This level compares pretty favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.4.
If we focus on the long-term trend of the stock the current level puts Pfizer’s current PE above its median over the observed period (which stands at 13.8x). Hence, we could infer that the stock is slightly overvalued in this respect, especially in light of its historical trend.
Nevertheless, the stock’s PE compares favorably with its industry’s trailing twelve months PE ratio, which stands at 16.5. At the very least, this indicates that the stock is relatively overvalued right now, compared to its peers.
PS Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Pfizer has a P/S ratio of about 4.2. This is lower than the industry average, which comes in at 4.6x right now.
PFE is actually in the higher zone of its trading range in the time period per the P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, Pfizer currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Pfizer an apt choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the company’s P/B ratio (used to compare a stock's market value to its book value) stands at 3.6, lower than the industry average of 5.9. Additionally, its P/CF ratio (another great indicator of value) comes in at 10.5, which is far better than the industry average of 15.9. Clearly, PFE is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Pfizer might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of C and a Momentum score of B. This gives PFE a Zacks VGM score—or its overarching fundamental grade—of B. (You can read more about the Zacks Style Scores here >>).
Meanwhile, the company’s earnings estimates have been mixed at best. The current quarter has seen one estimate go higher in the past sixty days compared to four lower, while the full year estimate has seen four upward revisions and one downward revision in the same time period.
This has had small impact on the consensus estimate though as the current quarter consensus estimate has remained constant over the past two months, while the full year estimate has inched up 0.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Pfizer has just a Zacks Rank #3 (Hold), which indicates that while analysts have some apprehensions about the stock in the immediate future, the stock’s growth story might be good over the long term. Thus, we are looking for in-line performance from the company in the near term.
Bottom Line
Pfizer is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 17% out of more than 250 industries) further supports the growth potential of the stock. In fact, year to date, the industry has clearly outperformed the broader market, as you can see below:
Notably, Pfizer has been working on strengthening its product portfolio through acquisitions and licensing deals. However, Pfizer continues to face headwinds in the form of genericization of key drugs, lost alliance revenues, pricing pressure and rising competition which is hurting the top-line.
Though Pfizer’s growing immuno-oncology portfolio offers strong potential, many of these assets are in early stage of development. Nonetheless, we believe that new products like Ibrance, contribution from acquisitions, cost-cutting efforts and share buybacks should help the company achieve its guidance.
Pfizer also boasts a strong pipeline and expects approximately 25 to 30 drug approvals over the next five years, including around 15 products that have blockbuster potential.
So, despite a Zacks Rank #3, we believe that bullish analyst sentiment for the long-term and favorable industry factors make this value stock a compelling pick.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Can Pfizer (PFE) Prove to be an Apt Value Investment?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Pfizer, Inc. (PFE - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Pfizer has a trailing twelve months PE ratio of 14.8. This level compares pretty favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.4.
If we focus on the long-term trend of the stock the current level puts Pfizer’s current PE above its median over the observed period (which stands at 13.8x). Hence, we could infer that the stock is slightly overvalued in this respect, especially in light of its historical trend.
Nevertheless, the stock’s PE compares favorably with its industry’s trailing twelve months PE ratio, which stands at 16.5. At the very least, this indicates that the stock is relatively overvalued right now, compared to its peers.
PS Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Pfizer has a P/S ratio of about 4.2. This is lower than the industry average, which comes in at 4.6x right now.
PFE is actually in the higher zone of its trading range in the time period per the P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, Pfizer currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Pfizer an apt choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the company’s P/B ratio (used to compare a stock's market value to its book value) stands at 3.6, lower than the industry average of 5.9. Additionally, its P/CF ratio (another great indicator of value) comes in at 10.5, which is far better than the industry average of 15.9. Clearly, PFE is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Pfizer might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of C and a Momentum score of B. This gives PFE a Zacks VGM score—or its overarching fundamental grade—of B. (You can read more about the Zacks Style Scores here >>).
Meanwhile, the company’s earnings estimates have been mixed at best. The current quarter has seen one estimate go higher in the past sixty days compared to four lower, while the full year estimate has seen four upward revisions and one downward revision in the same time period.
This has had small impact on the consensus estimate though as the current quarter consensus estimate has remained constant over the past two months, while the full year estimate has inched up 0.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Pfizer, Inc. Price and Consensus
Pfizer, Inc. Price and Consensus | Pfizer, Inc. Quote
Pfizer has just a Zacks Rank #3 (Hold), which indicates that while analysts have some apprehensions about the stock in the immediate future, the stock’s growth story might be good over the long term. Thus, we are looking for in-line performance from the company in the near term.
Bottom Line
Pfizer is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 17% out of more than 250 industries) further supports the growth potential of the stock. In fact, year to date, the industry has clearly outperformed the broader market, as you can see below:
Notably, Pfizer has been working on strengthening its product portfolio through acquisitions and licensing deals. However, Pfizer continues to face headwinds in the form of genericization of key drugs, lost alliance revenues, pricing pressure and rising competition which is hurting the top-line.
Though Pfizer’s growing immuno-oncology portfolio offers strong potential, many of these assets are in early stage of development. Nonetheless, we believe that new products like Ibrance, contribution from acquisitions, cost-cutting efforts and share buybacks should help the company achieve its guidance.
Pfizer also boasts a strong pipeline and expects approximately 25 to 30 drug approvals over the next five years, including around 15 products that have blockbuster potential.
So, despite a Zacks Rank #3, we believe that bullish analyst sentiment for the long-term and favorable industry factors make this value stock a compelling pick.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>