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What Pfizer’s Valuation Changes after 2Q17 Tell Us

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Sep. 22 2017, Updated 8:07 a.m. ET

Pfizer’s valuation

Pfizer (PFE) reported revenues of $12.89 billion in 2Q17, which represents a 2% YoY (year-over-year) fall in revenues, compared with $13.15 billion in 2Q16. Wall Street analysts estimate that PFE will see EPS (earnings per share) of $0.64 on revenues to $13.19 billion in 3Q17, which would be a 1.1% YoY growth in revenues.

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Forward PE

The PE (price-to-earnings) multiple represents what one share can buy for an equity investor. Pfizer was trading at a forward PE multiple of ~13.2x on September 19, 2017, compared with the industry average of ~16.8x.

By comparison, peers Bristol-Myers Squibb (BMY), Johnson & Johnson (JNJ), and Merck (MRK) are trading at forward PE multiples of 19.9x, 17.8x, and 16.1x, respectively.

Forward EV-to-EBITDA

On a capital-structure-neutral basis, Pfizer currently trades at a forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of ~10.7x, which is lower than the industry’s average of ~13.6x, as of September 19, 2017.

Peers Bristol-Myers Squibb, Johnson & Johnson, and Merck are trading at forward EV-to-EBITDA multiples of 16.6x, 13.6x, and 12.1x, respectively.

Analysts’ recommendations

Pfizer’s stock price has risen nearly 4.7% over the past 12 months ~9.4% in 2017 YTD (year-to-date). Analysts estimate that the stock has the potential to return ~5.9% over the next 12 months.

The analysts’ recommendations show a 12-month target price of $37.65 per share, compared with PFE’s last price of $35.55 per share on September 18, 2017. Of the 21 analysts tracking PFE, 11 recommend a “buy,” while ten recommend a “hold.” The consensus rating on Pfizer’s stock is 2.55, representing a “hold” for long-term investors and a moderate “buy” for value investors.

Notably, the iShares Edge MSCI Multifactor Healthcare ETF (HCRF) has 4.7% of its total assets in Pfizer (PFE).

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