HedgeFundLIVE.com — I think Pfizer is a good company to buy and hold
1. Balance sheet analysis: ( Balance sheet is very strong which is a positive sign)
(1) The 5 year P/E ratio is 16.64 and the 1 year forward P/E ratio is just 8.62. In addition, the stock price is about $19 which is relatively cheap. So I think Pfizer Inc is undervalued and it has margin of safety.
(2) It has attractive dividends which is 4.17%.
(3) EBITDA in 2010 is higher than the EBITDA during the past 10 years.
(4) The projected 1 year mean target price is $22 and the projected 1 year mean target price is $18. So this stock is relatively safe to buy and hold.
2. Fundamental analysis: (SWOT Analysis)
(1) The acquisition of Wyeth in October 2009 created a broader, more diverse portfolio and pipeline with industry-leading positions in potential high-growth areas, further strengthened by new capabilities in biotechnology and vaccines.
(2) Pfizer has powerful marketing strategies and networks which keep its market share solid.
The success of the acquisition of Wyeth will depend on Pfizer’s ability to realize the anticipated benefits and cost savings from integrating the operations of Pfizer and Wyeth. If they are not able to successfully integrate the operations of the two legacy companies, the anticipated benefits and cost savings of the acquisition may not be realized fully or at all or may take longer to realize than expected.
Pfizer has highly quality research and development abilities. In 2010 five enter human clinical trials and one is approved by the FDA and Phase III portfolio contained 24 programs. On February 1, 2011, Pfizer announced a focus on disease areas which can deliver great medical and commercial success.
(1) Upon the expiration or loss of patent protection for one of the products by a generic manufacturer of a generic version of one of the patented products, Pfizer can lose the major portion of sales of that product in a very short period, which can adversely affect their business. But I think Pfizer can buy other small firms and plug them into the marketing and distribution networks.
(2) Healthcare reform requires drug companies to reduce drug prices, which will increase Pfizer’s costs and decrease the revenues.
In conclusion, Pfizer has more advantages than disadvantages and I think it is undervalued. So Pfizer has margin of safety and it is worthwhile to buy and hold Pfizer for a long term.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.