A look at Pfizer’s valuation
Pfizer (PFE) reported revenue of $13.2 billion in 3Q17, ~1% growth from its 3Q16 revenue of $13.0 billion. The growth was mainly due to strong sales of Xtandi, Ibrance, and Xeljanz. In 4Q17, Wall Street analysts expect Pfizer to report revenue of $13.7 billion, ~0.7% growth from its 4Q16 revenue of $13.6 billion. In fiscal 2017, revenue of ~$52.6 billion is expected, marking a ~0.5% fall from 2016’s revenue of ~$52.8 billion.
The above chart compares Pfizer’s actual and estimated EPS (earnings per share) over the last few quarters. Analysts expect Pfizer to post EPS of $0.56 in 4Q17 and $2.59 in fiscal 2017.
Forward price-to-earnings multiples
PE (price-to-earnings) multiples represent what an equity investor can buy with one share. Pfizer was trading at a forward PE multiple of ~13.1x on December 29, 2017, whereas the industry average was ~17.8x. Competitors Merck (MRK), Eli Lilly (LLY), and Johnson & Johnson (JNJ) have forward PE multiples of 13.8x, 18.3x, and 17.8x, respectively.
Forward enterprise value multiples
On a capital-structure-neutral basis, on December 29, 2017, Pfizer was trading at a forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of ~10.6x, which was much lower than the industry average of ~12.4x. Competitors Merck, Eli Lilly, and Johnson & Johnson have forward EV-to-EBITDA multiples of 10.6x, 13.9x, and 13.1x, respectively. The SPDR S&P 500 ETF (SPY) has a 13.6% exposure to healthcare companies. SPY holds 0.9% in Pfizer, 1.6% in Johnson & Johnson, 0.4% in Eli Lilly, and 0.7% in Merck.