Investment in Pfizer Listed on NYSE and currently trading at $36.35, the stock c
ID: 374359 • Letter: I
Question
Investment in Pfizer
Listed on NYSE and currently trading at $36.35, the stock can be seen as value investment in the pharmaceutical sector considering P/E ratio, price to sales ratio and book value.
Analysis
2016 P/E ratio for Pfizer is 15.11; estimates for 2017, 2018, and, 2019 are 14, 13.23, and, 12.77; at the end of the quarter ending September, the value of the P/E ratio was 14.8 for the trailing 12 months. The value for the industry is 16.5. Pfizer’s median P/E value for the 2012-17 period is 13.8.
The stock can be considered a good investment as the earnings are expected to rise significantly and the stock will see a rise in price but the increase in earnings is responsible for the P/E estimates showing a decline over the next few years. Price to book value ratio is 3.6 compared to industry average of 5.9.
The median P/E value is 13.8 but at 14.8 the stock is overvalued considering the stock’s history; In the industry, though, the stock is a value investment as the P/E value for the industry is 16.5. Pharmaceutical sector stocks are being seen as a good investment as the industry is outperforming the market. Revenues are expected to come from Ibrance and immuno-oncology line of drugs; organization is expected to meet the earning estimates as per the guidance for the organization; share buybacks and saving on costs is also expected. As nearly 30 Pfizer drugs are approved by 2022; 15 are expected to add to the earnings tremendously. Price to cash-flow ratio for the industry is 15.9; while for Pfizer it is only 10.5.
Pfizer is a value investment in the sector and the industry is outperforming the market.
Explanation / Answer
Create a cover letter Directions: Assume your BFF is considering investing in Pfizer Inc. The cover letter should not go into detail about formulas and how to determine different amounts. Instead, the letter should immediately (in the first paragraph) state the purpose of the analysis and why you believe your BFF should invest in Pfizer Inc. The paragraphs to follow should discuss how and why your BFF should invest in Pfizer Inc. |
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