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Pfizer Inc. (NYSE:PFE) is a research-based, global biopharmaceutical company which manages its operations through five segments: Primary Care; Specialty Care and Oncology; Established Products and Emerging Markets; Animal Health and Consumer Healthcare, and Nutrition. On July 30, 2013, the company reported second-quarter earnings of $0.56 per share which beat analysts' consensus estimates by $0.01. In the last year the stock is up 18.52% excluding dividends, and is beating the S&P 500, which has gained 17.67% in the same time frame. With all this in mind I'd like to take a moment to evaluate the stock on a fundamental, financial, and technical basis to see if it's worth buying some stock in the company right now.

Fundamentals

Pfizer currently trades at a trailing 12-month P/E ratio of 19.24, which is fairly priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 12.31 is currently inexpensively priced as well for the future in terms of the right here, right now. Next year's estimated earnings are $2.30 per share and I would consider the stock cheap until about $34.50. The 1-year PEG ratio (2.94), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that the company is expensively priced based on a 1-year EPS growth rate of 6.54%.

Financials

On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. Pfizer boasts a dividend of 3.39% with a payout ratio of 65% of trailing 12-month earnings (or 81% based on free cash flow) while sporting return on assets, equity and investment values of 14.3%, 32.6% and 8%, respectively, which are all respectable values. The really high return on equity value (32.6%) is an important financial metric for purposes of comparing the profitability, which is generated with the money shareholders have invested in the company to that of other companies in the same industry. Because I believe the market may get a bit choppy here and would like a safety play, I believe the 3.39% yield of this company is good enough for me to take shelter in for the time being. The company has been increasing its dividends for the past 4 years after having cut the dividend during the time of the Wyeth purchase back in 2009.

Technicals

(click to enlarge)

Looking first at the relative strength index chart [RSI] at the top, I see the stock muddling around in middle ground territory with a value of 45.75 with upward trajectory, which is a bullish pattern. To confirm that, I will look at the moving average convergence-divergence [MACD] chart next and see that the black line is about to cross above the red line with the divergence bars increasing in height to the upside, indicating the stock is about to have upward momentum. As for the stock price itself ($28.28), I'm looking at $28.47 to act as resistance and $27.50 to act as support for a risk/reward ratio, which plays out to be -2.75% to 0.67%.

Recent News

  1. The company says it has completed pneumonia case accrual data in a trial of patients over 65 to evaluate if Prevenar 13 is effective in preventing community-acquired pneumonia.
  2. Goldman Sachs tracked the top ten best loved stocks by hedge funds and found that Pfizer was one of the top ten holding.

Conclusion

Pfizer is inexpensively valued based on future earnings and expensively priced on future growth prospects (one-year outlook). Financially, the dividend payout ratio is middle of the road based on trailing 12-month earnings and high on free cash flow, but I don't doubt management will be able to continue to increase the dividend going forward; based on future earnings the dividend payout ratio goes down to around 41% (if the dividend is kept steady). The technical situation of how the stock is currently trading is telling me we might be seeing some more upward pressure. The bullish technicals, high return on equity and great dividend are what I like about the company. Personally I sold the stock earlier in the year when it was in the 30's and have been waiting to jump back in, hopefully I can get an opportunity if there is a September swoon.

Disclaimer: These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!

Source: Hoping For A September Swoon To Pick Up Some Good Yielding Pfizer