Market Capitalization: $169.04 Billion
Enterprise Value: $232.07 Billion
Shares Outstanding: 5.67 Billion
Sector: Healthcare
Industry: Drug Manufacturers—General
Analysis as of: September 18, 2024

1. Company Overview

Pfizer Inc. is a global pharmaceutical corporation founded in 1849 and headquartered in New York City. The company discovers, develops, manufactures, and markets biopharmaceutical products worldwide. Pfizer operates in various therapeutic areas, including:

• Cardiovascular and Metabolic Diseases: Products like Eliquis for preventing blood clots.
• Vaccines: Including the Prevnar family for pneumococcal disease and Comirnaty, the COVID-19 vaccine developed in partnership with BioNTech SE.
• Oncology: Medications such as Ibrance and Xtandi for cancer treatment.
• Inflammation and Immunology: Drugs like Xeljanz and Enbrel for autoimmune diseases.
• Rare Diseases: Treatments like the Vyndaqel family for transthyretin amyloid cardiomyopathy.

Pfizer collaborates with other pharmaceutical companies and biotech firms, including strategic partnerships with BioNTech SE for mRNA vaccine development and Astellas Pharma US, Inc. for oncology products. The company’s broad portfolio and global reach position it as a significant player in the healthcare industry.

2. Financial Performance

a. Revenue and Growth

• Trailing Twelve Months (TTM) Revenue: $55.17 Billion
• Year-over-Year (YoY) Revenue Growth: -29.65%

Revenue Trend:

• FY 2019: $40.91 Billion
• FY 2020: $41.65 Billion (+1.82% YoY)
• FY 2021: $81.29 Billion (+95.16% YoY)
• FY 2022: $100.33 Billion (+23.43% YoY)
• FY 2023 (Estimate): $58.50 Billion (-41.70% YoY)
• TTM 2024: $55.17 Billion (-29.65% YoY)

Analysis: Pfizer experienced unprecedented revenue growth in 2021 and 2022, primarily due to its COVID-19 vaccine Comirnaty and antiviral treatment Paxlovid. However, the TTM period shows a significant revenue decline of nearly 30%, reflecting reduced demand for COVID-19-related products and increased competition. The estimated 41.70% revenue decrease for FY 2023 indicates continued challenges in maintaining pandemic-era revenue levels.

b. Profitability

• Net Income (TTM): – $2.60 Billion (Net Loss)
• Earnings Per Share (EPS, TTM): – $0.47
• Profit Margin: -4.70%
• Return on Equity (ROE): -2.74%
• Return on Assets (ROA): 0.94%
• Return on Invested Capital (ROIC): 1.27%

Analysis: The company reported a net loss in the TTM period, a stark contrast to the significant profits in previous years. Negative profit margins and returns indicate operational inefficiencies and challenges in cost management amid declining revenues. The loss may be attributed to decreased sales of COVID-19 products, increased R&D expenses, and potential write-downs or restructuring costs.

c. Cash Flow

• Operating Cash Flow (TTM): $8.01 Billion
• Free Cash Flow (FCF): $4.81 Billion
• Free Cash Flow Per Share: $0.85
• FCF Margin: 8.72%

Analysis: Operating cash flow decreased by 45.02% YoY, aligning with reduced profitability. Free cash flow declined by 54.90% YoY, suggesting less cash is available for dividends, debt repayment, and reinvestment. Despite the decrease, Pfizer maintains positive free cash flow, which is crucial for sustaining operations and shareholder returns.

d. Balance Sheet

• Total Assets: $216.19 Billion
• Total Liabilities: $128.22 Billion
• Total Debt: $69.86 Billion
• Cash & Cash Equivalents: $7.10 Billion
• Net Cash Position: – $62.76 Billion
• Current Ratio: 0.86
• Debt-to-Equity Ratio: 0.79
• Altman Z-Score: 1.83

Analysis: Pfizer’s net cash position is negative, indicating that its debt exceeds cash reserves significantly. The current ratio below 1 suggests potential liquidity issues in meeting short-term obligations. A debt-to-equity ratio of 0.79 indicates moderate leverage, but the high total debt level requires careful management. The Altman Z-Score of 1.83 is below the safe threshold of 3, signaling potential financial distress and a need for cautious financial planning.

3. Valuation

• Price-to-Earnings (PE) Ratio (TTM): Not Applicable (Negative Earnings)
• Forward PE Ratio: 11.21
• Price-to-Sales (PS) Ratio: 3.06
• Price-to-Book (PB) Ratio: 1.93
• Price-to-Free Cash Flow (P/FCF) Ratio: 35.14
• PEG Ratio: 1.17
• Enterprise Value (EV): $232.07 Billion
• EV/EBITDA: 23.29
• EV/EBIT: 70.69

Analysis:

• PE Ratios: The negative trailing PE ratio reflects the net loss in the TTM period. However, the forward PE of 11.21 suggests expectations of returning to profitability.
• PS Ratio: A PS ratio of 3.06 is relatively high, indicating the stock is trading at over three times its annual sales per share.
• PB Ratio: At 1.93, the stock is trading below twice its book value, which may be considered reasonable given the company’s asset base.
• PEG Ratio: A PEG of 1.17 suggests the stock is fairly valued relative to its expected earnings growth.
• EV Multiples: High EV/EBITDA and EV/EBIT ratios indicate that the company is expensive relative to its earnings before interest, taxes, depreciation, and amortization, possibly due to current low earnings.

Conclusion: The valuation metrics present a mixed picture. The forward PE and PEG ratios imply potential value if earnings recover. However, high EV multiples and negative earnings raise caution about overvaluation in the short term.

4. Market Performance

• Current Stock Price: $29.83
• 52-Week Range: $25.20 – $34.12
• 52-Week Price Change: -11.33%
• Beta: 0.62
• Average Volume (20 Days): 26,181,611
• Relative Strength Index (RSI): 58.55
• Dividend Yield: 5.63%

Analysis: Pfizer’s stock price has declined over the past year, reflecting market concerns about declining revenues and profitability. The low beta indicates lower volatility compared to the broader market, potentially appealing to risk-averse investors. The RSI suggests the stock is neither overbought nor oversold. A high dividend yield may attract income-focused investors, though sustainability should be assessed.

5. Financial Health and Risks

a. Liquidity

• Current Ratio: 0.86
• Quick Ratio: 0.51

Analysis: Ratios below 1 indicate potential challenges in meeting short-term liabilities. Low liquidity may require the company to secure additional financing or restructure operations to improve cash flow.

b. Leverage

• Debt-to-Equity Ratio: 0.79
• Debt-to-EBITDA Ratio: 6.21
• Interest Coverage Ratio: 1.11

Analysis: Pfizer’s leverage is significant, with high debt levels relative to equity and earnings. The interest coverage ratio close to 1 suggests that operating income barely covers interest expenses, posing a risk if earnings do not improve.

c. Operational Risks

• Revenue Dependence on COVID-19 Products: The decline in demand for COVID-19 vaccines and treatments significantly impacts revenues.
• R&D Uncertainty: High R&D expenses are inherent in the pharmaceutical industry, with no guarantee of successful product development.
• Patent Expirations: Loss of exclusivity on key drugs can lead to revenue erosion due to generic competition.

d. Market Risks

• Regulatory Environment: Changes in healthcare regulations, pricing policies, and approval processes can affect operations.
• Competition: Intense competition from other pharmaceutical companies and biotech firms can impact market share.
• Litigation: The industry faces ongoing legal challenges, including product liability and patent disputes.

e. Dividend Sustainability

• Dividend Payout Ratio: Not meaningful due to negative earnings.
• Dividend Growth (YoY): 2.45%
• Years of Dividend Growth: 13

Analysis: While Pfizer has a history of dividend growth, the sustainability of its dividend payments may be at risk if negative earnings persist. The company’s ability to maintain dividends will depend on cash flow generation and profitability improvements.

f. Altman Z-Score

• Altman Z-Score: 1.83

Analysis: A Z-Score below 1.8 indicates a higher risk of financial distress. Pfizer’s score suggests caution, and investors should monitor the company’s financial health closely.

6. Conclusion

Pros:

• Diverse Product Portfolio: Pfizer has a broad range of products across multiple therapeutic areas, reducing reliance on a single revenue source.
• R&D Pipeline: Significant investment in research and development could lead to future growth if new products are successfully commercialized.
• Attractive Dividend Yield: A yield of 5.63% may appeal to income investors seeking dividend-paying stocks.

Cons:

• Declining Revenues and Earnings: Significant decreases in revenue and profitability raise concerns about the company’s operational performance.
• High Debt Levels: Elevated leverage and low interest coverage increase financial risk.
• Liquidity Concerns: Low current and quick ratios suggest potential difficulties in meeting short-term obligations.
• Regulatory and Legal Risks: The pharmaceutical industry is subject to stringent regulations and legal challenges, which can impact financial performance.

Disclaimer: This analysis is for informational purposes only and does not constitute financial advice. Investors should conduct their own due diligence or consult a financial advisor before making investment decisions.