Pfizer (PFE) Valuation Check As Shares Recover Modestly From Longer Term Weakness

Recent performance snapshot for Pfizer (PFE)

Pfizer (PFE) has moved quietly higher in recent months, with a 1-month return of 4.9% and a past 3-month return of 5.4%, while its 1-year total return sits at 7.6%.

See our latest analysis for Pfizer.

With the share price at $26.10 and a steady 30 day share price return of 4.9%, recent gains contrast with a 3 year total shareholder return decline of 29.3%, suggesting improving sentiment relative to a weaker long term picture.

If Pfizer has you watching big pharma again, it could be a good moment to scan pharma stocks with solid dividends for other income focused opportunities in the sector.

With Pfizer trading at $26.10, a value score of 5, an intrinsic discount figure of 53.8% and annual revenue and net income growth both in decline, you have to ask yourself: is this a genuine value opportunity, or is the market already pricing in future growth?

Price-to-Earnings of 15.1x: Is it justified?

On a P/E of 15.1x at a share price of $26.10, Pfizer screens as inexpensive compared with both peers and the wider US pharmaceuticals group.

The P/E ratio compares the share price with earnings per share, so it gives you a simple snapshot of how much the market is paying for each dollar of current earnings. For a large, established biopharma group with US$62,785m of revenue and US$9,797m of net income, this is a commonly watched yardstick.

Here, the market is assigning Pfizer a lower earnings multiple than both the peer average P/E of 18.3x and the US pharmaceuticals industry average of 19.6x, while our work also points to an estimated fair P/E of 23.7x. That gap indicates investors are paying a clear discount to what earnings-based models suggest the multiple could move toward if sentiment or earnings quality improve.

Explore the SWS fair ratio for Pfizer

Result: Price-to-Earnings of 15.1x (UNDERVALUED)

However, the 3 year total shareholder return decline of 29.3% and the annual revenue and net income contraction still raise questions about how durable any value case really is.

Find out about the key risks to this Pfizer narrative.

Another view on value: cash flows tell a stronger story

While the 15.1x P/E points to a discount against peers and the US pharmaceuticals group, our DCF model goes further, suggesting Pfizer at US$26.10 trades 53.8% below an estimated future cash flow value of US$56.53. That is a big gap; is it a safety margin or a warning sign?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Pfizer for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 878 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.

Build Your Own Pfizer Narrative

If you see the numbers differently or want to stress test the assumptions yourself, you can build a fresh view in just a few minutes by starting with Do it your way.

A great starting point for your Pfizer research is our analysis highlighting 3 key rewards and 4 important warning signs that could impact your investment decision.

Looking for more investment ideas?

If you stop with Pfizer, you might miss other opportunities, so take a few minutes to line up fresh ideas that fit your goals and comfort level.

This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com