Pfizer's own guidance, and its analysts expectations, guide for the company to make about $3.50 earnings this year and moving closer to $4 next year.
This estimate takes into account the fact paxlovid and MRNA vaccine income is substantially reduced now.
The long term industry average forward PER over 20 years for the healthcare sector in the USA is 15.5x. (That includes deeply indebted and troubled companies, in which regard Pfizer is better than the average). [1]
Assuming the company will likely return to around the long-term average of the sector in coming years. That would place Pfizer on a price of say 15.5x$3.50 = $54 to 15.5x$4 = $62, plus any further earnings growth.
The price today is just $35. That suggests there should be an opportunity to take a gain of 50-70% plus dividends plus growth, simply by waiting for mean reversion.
It's also possible the pendulum of Pfizer or of the healthcare sector can swing to 18x-20x, as it has in the past, and there is some optionality value should a new strain of covid arise which requires urgent mass vaccination with a rapidly adjusted vaccine.
Similarly an argument can be made for BMY and a few others, though BMY has higher debt.
It's a pretty simple argument, but I think, quite compelling. Be sure to do your own research!
I hold PFE, I don't hold BMY.
Leave a Reply