Pfizer Inc., a biopharmaceutical company, discovers, develops, manufactures, and sells medicines for people and animals worldwide. Its Primary Care segment offers human prescription pharmaceutical products primarily prescribed by primary-care physicians for Alzheimers disease, cardiovascular, erectile dysfunction, genitourinary, major depressive disorder, pain, respiratory, and smoking cessation therapeutic and disease areas. The company's Specialty Care and Oncology segment provides human prescription pharmaceutical products for anti-infectives, endocrine disorders, hemophilia, inflammation, ophthalmology, pulmonary arterial hypertension, specialty neuroscience, and vaccines, as well as oncology and oncology-related illnesses. Its Established Products and EmergingMarkets segment offers human prescription pharmaceutical products that have lost patent protection or marketing exclusivity in certain countries and/or regions, as well as that are sold in emerging markets, including Asia, Latin America, the Middle East, Eastern Europe, Africa, Turkey, and Central Europe. The company's Animal Health segment offers products and services to prevent and treat disease in livestock and companion animals, including anti-infectives, vaccines, parasiticides, medicinal feed additives, other pharmaceutical products, and other non-pharmaceutical products. Its Consumer Healthcare segment provides non-prescription products in therapeutic categories, such as dietary supplements, pain management, respiratory, and personal care. The company sells its products to wholesalers, distributors, retailers, hospitals, clinics, government agencies, pharmacies, individual provider offices, veterinarians, livestock producers, and grocery and convenience stores. Pfizer Inc. has a strategic collaboration with CytomX Therapeutics, Inc. to develop and commercialize Multiple Probody drug conjugates in oncology. The company was founded in 1849 and is headquartered in New York, New York.
Current Yield and Dividend Growth
Pfizer currently pays a dividend of $0.24 per quarter for a $0.96 annual dividend. At the close of market on Friday, September 27th PFE’s price per share was $28.88. This gives the stock a current dividend yield of 3.32%. Normally I look for a dividend yield of at least 3%, so I will be satisfied with this dividend yield from PFE.
In 2003, Pfizer paid an annual dividend amount of $0.60 per share. The dividend trend has been up each year, except year 2009 and 2010 Pfizer cut their dividends. I believe Pfizer will increase their annual dividend soon back to same level as it was on year 2008. This gives PFE a 10 year annual compound dividend growth rate of 5.40%. Pfizer has increased its dividend now three years. Pfizer´s dividend growth rate has been bad on last 5 and 10 years, but has go better on last year. With over 10% growth rate it's good again.
Pfizer's EPS has grown an average of 2.88% over the past 10 years, 10.63% in the past five years. The past three years, EPS has grown by nice 16.4%, and in the past year growth has been excellent 52.76%. Pfizer's EPS of development in recent years makes me very convinced at the moment. Analyst estimates for 5 years earnigs growth rate per annum are 2.9% ( http://finance.yahoo.com/q/ae?s=PFE+Analyst+Estimates) I suppose Pfizer`s EPS will grow up more on next five years.
Pfizer's net income has increased by an average of 4.79% over the past 10 years, 12.34% in the past five years, 19.05% in the past three years and 45.57% in last year. Net income has same trend as EPS. Net income development in recent years also makes me convinced that Pfizer is a good investment for the future.
Pfizer's revenue has increased 6.18% over the past 10 years, 4.03% in the last 5 years. Also, in the last 3 years, profits have grown 5.66%, only last year, revenue fell by -12.52%. Pfizer has many products under development ( total 76), and currently has 17 in phase 3, so I am fully convinced that Pfizer's revenue will grow in the future.
Pfizer`s amount of shares has varied a lot. From year 2004 those went down nicely, but on year 2008 and year 2009 those increased very much. I would like to see amount of shares go down every year, or at least stay on same level, because less shares outstanding, my shares are giving me a larger portion of the earnings.
Pfizer's dividend payout ratio has been in the past 10 years by about 93.19%. This means that Pfizer has distributed almost all of the profits to shareholders. With over 3% dividend yield, I would like to see, that Pfizer`s payout ratio would go down, like it has done on last 2 years. Currently it`s 25.21%.
Pfizer's ROE has been over 12% over the past 10 years, which are okay for me.
Current ratio measures the company's ability to meet short-term obligations. Pfizer has current ratio 2.15 at the end of 2012. This means that the funds will be able to cover 215% of current liability obligations. I usually like the current ratio is greater than 1, so Pfizer looks fine in this case.
Net Profit to long term debt
This number tells me how many years it will take to pay off the current long term debt of the company by using all net profit into it. I want this ratio to be less than 5, because the company is able to pay for all long-term debt from less than five years and on my opinion then company don´t have too much debt. Pfizer`s long term debt has been under 5 times net profit on last 10 years, even on 2009 it was 5. In the last 10-year average is 1.96, last year it was 2.13. From year 2009 it has gone down very much and I suppose that ends of year 2013 it will be near 1.5.
To found out share fair value I mainly use six different methods. (http://www.passive-income-pursuit.com/search/label/stock%20valuation%20method).
Average P/E Ratio
Pfizer`s current P/E are 8, which are close to it`s historical 5 years average low (11.77) and also more near 10 years average low (17.12) as 10 years average high (24.20). By calculating using estimated EPS $2.16 for year 2013 and the average 5-year low P/E ratio shares fair value will be $25.42. Using the 10-year average low P/E ratio, fair value will be $36.98.
Average Dividend Yield
Pfizer`s current annual dividend are $0.96. At the close of market on Friday, September 27th PFE’s price per share was $28.88. This gives the stock a current dividend yield of 3.32%. Average 5 years high dividend yields has been 6% and average 10 years high dividend yields has been 5%. Those dividend yields gives share fair value $15.31 for 5 and $19.02 for 10 years.
Average P/S Ratio
Pfizer`s current P/S ratio are 3.95 with revenue estimates for year 2013 (51.47B). Average 5 years low P/S ratio are 1.96 and average 10 years low P/S ratio are 2.68. By calculating using estimated revenue for year 2013 and the average 5 years low P/S ratio fair value will be $14.35. Using the 10 years average low P/S ratio, fair value will be $19.61.
Discounted Cash Flow
Analyst estimates for 5 years earnings growth rate per annum are 2.9%. I will use on my calculation 66% of that, which are 1.91%. Then I assume that continue growth after 5 years will be 3%. I use discount rate 10% and EPS $3.65. That will give me share fair value $51.26.
SFV of Future EPS
Dividend Discount Model
Pfizer`s current annual dividend are $0.96. I assume that Pfizer will be able to grow dividends for the next 5 years at the lowest of the 1, 3, 5, or 10 year growth rates or 15%. In this case that would be 3.23%. Then I assume that after 5 years grow rate will be 5%. To calculate the value I used a discount rate of 10%. That will give me share fair value $17.88.
SFV of Future Dividends
Pfizer has EPS 3.65 (ttm). When I calculate Pfizer`s future price with analyst estimate for 5 years EPS growth and using low P/E ratio last 5 years, I came for price $49.55.
Pfizer are a great company and I will hold shares of it in my portfolio. Based on my analysis, I think Pfizer are currently overvalued, and I am not prepared at this time to buy more shares of Pfizer. If the price would fall down to near $25, then I might be interested add it to my portfolio. I will wait and look if Pfizer are able to turn it`s revenue growth back at the good direction.
Disclosure: I`m long PFE.