Pfizer (PFE)

For those of you who do not know Pfizer, it is a HUGE company. On Monday December 4, Pfizer announced the cancellation of a very “promising” drug and a sell off happened. The volume for the day was 300 million! Think about that for a moment, it is like every person in America waking up and selling/buying a share of Pfizer. The stock dropped 10% that day whipping out about 20 billion of market cap. I have decided to put this puppy in the oversold/overreaction category. The company has an 18.5% Return on Equity ttm and about 25% 5 yrs average. Pfizer has a Return on Assets of 11%& ttm and about 11% for the past 5 years. Pfizer’s net profit margin is consistently in the 20%+. It currently trades at a P/E of 14, below the S&P’s P/E of 20.8 and its 5 yr average of about 21.Pfizer is also currently trading at 2.6 times book value (ttm), again well below its 5 year average. It currently has 15.8 billion in free cash flow (ttm) or $10/share. Think about that for a minute15.8 billion is the size of the GDP of some countries. Lipitor, it’s most popular and important drug patent doesn’t expire until 2010 and 2011. What about product pipeline? Ahhh that argument is as old as the hills. In addition, with 15.8 billion in free cash flow you can do many things to add some products. For example, it can acquire another company or spend it on research and development. This brings me to my next point. Pfizer’s R&D is consistently at 15%. This is critical for pharmaceuticals as you always want to have new products being developed. In my opinion, PFE is worth at least $36.

"be greedy when others are fearful and be fearful when others are greedy"

-Warren Buffett

Disclaimer: I do not own shares in Pfizer (PFE)