As part of a new series, each week we’re going to conduct a DCF on one of the companies in our screens. This week the stock is Pfizer Inc (PFE). We currently have the stock on an Acquirers Multiple of 6.60. The stock is currently priced at $35.64.
Pfizer is one of the world’s largest pharmaceutical firms, with annual sales close to $50 billion (excluding COVID-19 product sales). While it historically sold many types of healthcare products and chemicals, now, prescription drugs and vaccines account for the majority of sales. Top sellers include pneumococcal vaccine Prevnar 13, cancer drug Ibrance, cardiovascular treatment Eliquis, and immunology drug Xeljanz. Pfizer sells these products globally, with international sales representing close to 50% of its total sales. Within international sales, emerging markets are a major contributor.
Discount Rate: 8%
Terminal Growth Rate: 2%
Forecasted Free Cash Flows (FCFs):
Terminal Value = FCF * (1 + g) / (r – g) = $508.3billion
Present Value of Terminal Value
PV of Terminal Value = Terminal Value / (1 + WACC)^5) = 345.94 billion
Present Value of Free Cash Flows
Present Value of FCFs = ∑ (FCF / (1 + r)^n) = $98 billion
Enterprise Value = Present Value of FCFs + Present Value of Terminal Value = 443.95 billion
Net Debt = Total Debt – Total Cash = 34.45 billion
Equity Value = Enterprise Value – Net Debt = 409.50 billion
Per-Share DCF Value
Per-Share DCF Value = Enterprise Value / Number of Shares Outstanding = $72.54 per share
|Margin of Safety||50.87%|
Based on the DCF valuation, Pfizer is currently undervalued. The DCF value of $72.54 per share is higher than the current market price of $35.64 which indicates that the stock is undervalued. Margin of Safety is 50.87%.
It’s important to note that this valuation is based on the assumptions and inputs provided, and it’s always recommended to consider multiple valuation methods and conduct further analysis before making investment decisions.
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