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What Happened to Pfizer’s Valuation after 1Q17?

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A look at Pfizer

Pfizer (PFE), a pharmaceutical giant headquartered in New York City, reported EPS (earnings per share) of $0.69 on revenues of ~$12.8 billion for 1Q17.

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Forward PE and EV-to-EBITDA

PE multiples represent what one share can buy for an equity investor. Pfizer was trading at a forward PE multiple of ~12.2x on June 7, 2017, as compared to the industry average of ~16.8x. Peers Johnson & Johnson (JNJ), Eli Lilly (LLY), and Merck (MRK) have forward PE multiples of 17.6x, 18.7x, and 16.7x, respectively.

On a capital structure neutral basis, Pfizer currently trades at ~9.9x, which is much lower than the industry’s average of ~12.2x. Competitors Johnson & Johnson (JNJ), Eli Lilly (LLY), and Merck (MRK) have forward EV-to-EBITDA multiples of 12.1x, 13.9x, and 10.5x, respectively.

PFE’s analyst recommendations

Pfizer stock has fallen nearly 1.3% YTD (year-to-date), while the iShares US Pharmaceuticals ETF (IHE) has risen 6.4% YTD. Analysts estimate that Pfizer stock has a potential to return ~17.1%.

Analysts’ recommendations indicate a 12-month targeted price of $37.55 per share for PFE stock, as compared to the last price of $32.07 per share on June 6, 2017. There are 21 analysts tracking Pfizer, 11 of which are recommending a “buy. Ten analysts are recommending a “hold” for the stock. The consensus rating on the stock is 2.55, which shows a moderate “buy” for the value investors.

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