Corporate Financial Analysis Of Pfizer Finance Essay

Corpo rate Financial Analysis Of Pfizer Finance EssayPfizer, is the worlds largest research-based pharmaceutical familiarity, founded in 1849. The company is headquartered in Midtown Manhattan, New York, with its research provide in Groton, Connecticut. Ian Read is the president and CEO of Pfizer. And some other important officers atomic number 18 these following people. ( defer 1)The Company manages its ope rations through five segments Primary Care fortissimo Care and Oncology Established Products and Emerging Markets Animal Health and Consumer Healthcare, and Nutrition. The Companys diversified global healthcare portfolio includes human and animal biologic, sm exclusively molecule medicines and vaccines, as well as nutritional and consumer healthcare point of intersections. Pfizer produces many house hold famous medicine like Lipitor, Viagra and Celebrex.Pfizer has 103,700 employees and in No. 81 of Carbon Disclosure Rating. And hither are some important data. (Table 2)In th e highly competitive pharmaceutical industry, Pfizer has these main competitors Ankur Drugs and Pharma Ltd. and Bayer.1.2 Analyst Coverage1.2.1 Analyst OpinionThis table (1.1) submits the analyst panorama to recommendation trends. We stick out see strong buy and buy both nurse a high score while the other three have a very low score. It suggests that layors to buy this stock but do non suggest long-term hold.1.2. 2 Analyst EstimateHere these both tables show the analyst estimate on Pfizer. They are just a part of the analyst estimate. Earnings history (1.2) shows that the difference between EPS Estimate and EPS unfeigned is very small. So the estimate was quite accurate.1.2.3 charge Target SummaryThe recent stock terms of PFE is about $22.56. This expenditure is a little displace than the worth target in table (1.3). It does not mean it is not good. At least this price is higher than its low target. Pfizers stock is not shitty and still have chance to perform better.1. 3 Analysis of Pfizers financial statements1.3.1 Balance Sheet AnalysisIn general, the total amount of the assets of Pfizer reduced from 212.949 cardinal (in 2009) to 188.002 zillion (in 2011). This may because Pfizer wanted to give up unattractive investments and focused on its innovation core.Total liabilities decreased continuously. It indicates Pfizers dexterity of repayment of debt was not bad. Current liabilities decreased 1.98% from 2010 to 2011 and 23.1% from 2009 to 2010. Changes of total liabilities were similar.On stockholders blondness, its total modus operandi also decreased as the result of its decrease of total assets. Due to the decrease in total assets, the stockholders equity decreased 6.4% from 2011 to 2010 and 2.4% from 2010 to 2009. ( interpret 1)We weed rate Debt-Equity Ratio, Current Ratio, and Quick Ratio in 3 yrs. (Table 3) As we post see from the table 1, Pfizers financial situation in 2011 was not bad.1.3.2 Income Statement AnalysisIn 2011, total revenue was 67.425 million, a 0.54% increase over 2010 and a 36.85% increase over 2009. Operating income in 2011 was 12.762 million and net income was 10.009 million, both of them change magnitude. Gross profit was not very obvious but we can find a sharp increase from 2009 to 2010. (Graph 2)In 2011, ratio of gross profit and total revenue was 77.63%. Operating expenses of total revenue proportion in three years were around 60%. It shows Pfizers ability of unequivocal in operating expenses was better in 2010 and 2009. (Table 4)Graph 3 shows that changes in gross margin, operating margin, net profit margin, ROA and ROE. The companys operating conditions were very stable. (Graph 3)1.3.3 Cash lean AnalysisHere is a table shows that three years cash flows of three kinds of activities. (Table 3)In 2009, cash flows from operating activities were 16.587 million and in 2010.If investing activities slang expression bring enough money to make up cash outflows, cash flows from investing ac tivities would be negative. In 2011, Pfizers cash flows from investing activities were 2.2 million. Pfizers investments were effective and they created a verificatory cash flow and can create profit. (Table 4)Generally speaking, the larger the cash flows from financing activities the more pressure of debt the company will be faced with. We can see in 2010 and 2011, Pfizers was under huge pressure. All in all, Pfizer has a good financial situation.1.4 Summary of Pfizers Challenges2011 was generally a good year for Pfizer, Inc. Revenues change magnitude 1%, Net income also had significant gains. However, the company still faces diverse challenges from many aspects, which can have a long term impact on Pfizers performance.U.S. Healthcare Legislation Enacted Since 2010It brought two negative influences 1. A $648 million reduction to Revenues, related to higher, extended and expanded rebate provisions and the Medicare coverage gap sack provision. 2. An extra $248 million expense in in formational, sales and administrative, related to the fee payable charged by the federal government.Loss of Expiration of Intellectual attribute RightsIt can be an adverse factor and decline total revenues. When the patent protection has expired, Pfizer loses exclusivity on these products and generic pharmaceutical manufacturers can produce similar products and cuckold them for a lower price.Problems in Productivity and Regulatory EnvironmentPfizer devoted significant resources to research and development these activities involve a high risk and may take many years to transfer research achievements into products. Besides, there is no assurance that the development of any particular product will achieve in demand(p) clinical success, be approved by regulators and commercially. If Pfizer failed, sunk costs lost, which can be a huge loss.1.4.4 Pfizer is Under Pressures of Pricing and AccessGovernments, healthcare organizations and other payer groups implement price controls and requi re price cuts in order to pay slight in purchasing Pfizers products. There were government regulated price reductions for certain products beginning in 2011. Whats more, health insurance and social welfare plans continue to limit access to some of Pfizers medicines by setting restrictions in the increase use of generics.1.4.5 Challenges from Poor Macroeconomic EnvironmentWe believe that with high unemployment rate and increases in co-pays, patients tend to buy generics, delay treatments, skip doses or use less effective treatments to reduce costs. During 2011, portions of the revenues are exposed to fluctuations in foreign exchange rate. Pfizer need to seek appropriate management in foreign exchange rate risk as it operates in multiple foreign currencies2. Stock Price Analysis2.1 Track Pfizers Stock Price in the Last 3 age2.1.1 2009(Graph 4)We can find that the stock price continued going down from Jan. to Mar. However, it went up until the end of the year. Stock price in Mar is t he lowest all the year and the stock price at the beginning of the year and the end of the year are al around the highest. The highest is nearly $19, and the lowest is less than $12.2.1.2 2010(Graph 5)The chart show us that the stock price in 2010. Generally speaking, the stock price went down from Jan to Jul. We can see the stock price in Jul is the lowest number throughout the year, and it was 14.14 dollars per unit. After Jul, the stock price gradually rose. But between Aug and Sep, the stock price experienced a decline within a settle range. This circumstance also happened between Nov and Dec. The highest price occurred in Jan, and it was 20.00 dollars per unit.2.1.3 2011(Graph 6)It seems that the chart of 2011 was a little complex. From Jan to Jun the general momentum of the stock price was up though a few small declines. From Jun to Aug, the number experienced a decline by a large margin after Aug, the statistics generally rose up though some declines. The highest price was 2 1.83 dollar per unit in Dec, and the lowest price was in Aug, and the number was 16.66 dollar per unit.2.2 Calculate Stock Price of the CompanyTo calculate the stock price of the company, I will use the formula EPS-P/E=P.EPS=NI/ SO. I will calculate the stock price of the company in 2012. (Graph 7)1. Highest and lowest PE Ratio in 2009 are 14.79 and 11.45, so the average ratio is 13.12.2. The 2 ratios in 2010 are 23.52 and 13.58, so the average is 18.55.3. The 2 ratios in 2011 are 19.34 and 12.28, so the average ratio is 15.81. (Graph 8)The EPS in 2009, 2010 and 2011 are 1.235, 1.205, 1.255.According to P=EPS-P/E, stock price in 2009, 2010, 2011 are 16.2022.3519.84.2.3 Assessment of the Current Stock PriceAccording to the Income statement, PFE has earnings per share of 1.27, the average P/E is $17.81, estimate a value of PFE using P/E as a evaluation multiple.Thus, P=$1.27*17.80=$22.6060B It assumes that PFE will have similar future risk.Assuming NVS is comparable to PFE in term of its underlying business NVS has earnings per share of $3.55, the average P/E is $15.39, under the same assumption, P=$3.55*15.39=$54.6345B.Compare to the two major competitors, PFE share price is relatively low. According to Income Statement, PFE has EBITDA of $27.56B and has an enterprise value to EBITDA multiple of $6.71, shares great(p) of 7.54B and debt of $38.96BEnterprise value would be V=$27.56B*6.71=$184.9276, estimate PFEs share priceP=(184.9276-38.96)/7.54=$19.2361.As this estimation is based on enterprise value, it is more tried than the first one. It is overvalued obviously when its stock price being $22.66 per share.Similarly, NVS has EBITDA of $17.05, enterprise value to EBITDA multiple of 8.81, shares outstanding of $2.42 and debt of $24.59. NVS share price would be P=(17.05*8.81-24.59)/2.42=$51.9093As Comparables scarcely provide information regarding the value of a firm relative to other firms in the comparison set, using multiples will not help us fancy if an entire industry is overvalued. According to the research, PFE share price is much less than NVS, I would suggest that PFE is relatively less deserving investment.According to the Balance Sheet, dividend gainful is $6.234. , it is easy to get the dividend paid annually Div=$6.234/7.54=$0.8268The share price is $22.66, suppose investors hope the constant dividend growth model would based on a 4% growth rate, we would estimate a stock price of P=0.8268/(0.4811-0.04)=$1.8744We can calculate the growth rate g=r-Div/P=0.4811-o.8268/22.66=1.16%.Investors would feel disappointed if invest in PFE as the growth rate is relative lower than he/her expectations.2.4 Value of Pfizers Stock Price Compared with CompetitorsFrom statistics online, we can know that the 52week range of Pfizer is 16.63-23.3, Roches is 115.1-169.2, and Eli Lilys is 33.75-42.03. Obviously, the stock price of Roche changes the most, the changed absolute amount of 54.1. A risk lover may prefer this kind of stock because it can change by a larger scale, and if we can seek this opportunity well, huge profits can be achieved.Compared with Roche, Pfizer stock has a large advantage. The change scope of Pfizer stock is not big, which indicates that it is relatively stable, and a risk-averse may prefer this kind stock. The perceived benefit of any gain is outweighed by the perceived cost of an equivalent loss. Most people are risk-averse, so Pfizer stock has an excellent competitive advantage and suitable to hold for a long time.Besides, to compare the value of the stock price, analyzing the P/E ratio is the most traditional method. Pfizer earned $1.24 per share last year and the stock is trading at 22.38, so the stock has a P/E ratio of nearly 18.05-to-1.Similarly, the P/E ratio of Roche is 15.04, the P/E ratio of Eli Lily and Company is 10.7. Generally, the lower the P/E ratio, the better value the stock represents. Thus, in this circumstance Pfizer is less competitive than his competitor, Roche and Eli Lily and Company.2.5 Beta of Pfizer and Comparison with Its CompetitorsThe beta of Pfizer is 0.64, the beta of Roche is 0.66, and the beta of Eli Lily and Company is 0.37. Beta is a risk index, can be used to beatnik fluctuation of one stock price relative to the whole stock market. The bigger the absolute amount, the larger the change of profit .The stock of Pfizer and its competitors, Roche and Eli Lily and Company, all can be regarded as low risk stocks.3. Summary3.1 Major Developments of Pfizer during 1Q of 2012During the 1st quarter of 2012, Pfizers revenues were $15.4 billion, a decline of 7% compared with $16.5 billion in the year-ago quarter and the untoward impact of foreign exchange of $57 million, or less than 1%.Established products unit revenues increased 17% in comparison with prior year period, obviously driven by recent launches of generic versions of some products. Revenues of Lipitor were $383 million, which made a great contribution to the company. In addition, revenues were positively influenced by the intromission of multi-source generic competition in the U.S. Emerging markets unit revenues grew 9% due to continued demand growth in China, Russia and Mexico.In animal health unit, revenues increased 6%, primarily due to the purchase of King Pharmaceuticals. Nutrition unit revenues gained 8%, created by making benefits from the launch of successful new products, increased trade activities and overall strength in emerging markets, especially China.Pfizers first-quarter 2012 financial performance is pleased however, it still faces fierce competition from other companies. Pfizer need to focus its problems in exclusivity and financial management.3.2 Summary of All We Have Learnt About PfizerPfizer is better than others. It could be name recognition, innovation, market share or any other attributes that makes a company stand out from the herd. From what has been discussed, we may draw the conclusion that there are three ideas to contribute th e success of Pfizer. Innovation creates success and being innovative in your business is one of the keys to being successful. Innovation is the introduction of new processes, new ways of doing things and revolutionizing how things have been accomplished previously.The most surprising thing is Pfizer cannot research an important drug independently in the past 10 years of 20 century. Although it invested huge amount of money in R D, it seems more like a marketing company. Throughout Pfizers development in recent years, its success can be summed up that use the advantage of large-scale and well-capitalized to strengthen the ability in value chain in marketing. Through buying mature technology, products and combination new companies, building alliance with competitors to consolidate its market share. Giving full turning to the enthusiasm of its medical representatives, integrating the advantages of its marketing network, and enhancing core competitiveness, thus achieve a leading posi tion in the industry. In conclusion, Pfizer is a rare manakin of successful combination of R D and marketing strategies in international pharmaceutical companies.3.3 Should We Buy Pfizers Stock or NotPfizer has a good ability in finance, improved control in operation. For big investors, I would recommend Pfizer, which requires low risk, stable growing dividends, and long term return. Despite Pfizer stock price is relative lower than its competitors, big investors can gain large amount of cash by purchasing large amount of shares.However, I will not recommend Pfizer to retail investors. It would not be wise to invest in a company which may take years to transfer research investments into product profits. Higher return indicates higher risk it would be too risky for retail investors to take the gamble. Quick money never stays too long.AppendicesTable 1Table 2Table 3201120102009Debt-Equity Ratio0.5630.5500.577Current Ratio2.0572.1311.657Quick Ratio1.7801.8421.323Table 4201120102009Op erating activities20,240,00011,454,00016,587,000Investing activities2,200,000(492,000)(31,272,000) finance activities(20,607,000)(11,174,000)14,481,000Graph 1Graph 2Graph 3Graph 4Graph 5Graph 6Graph 7Graph 8Tables(1.1)(1.2)(1.3)