Some reliable stocks now appear absurdly undervalued as a result of the recent market slump. This is the situation with pharmaceutical behemoth Pfizer (PFE -0.94%), a market leader in coronavirus vaccines and a producer of numerous other drugs.
The stock presently has a forward price-to-earnings (P/E) ratio of 7.4, which is extremely fair. This is in contrast to the industry-wide P/E of 12.5 for the pharmaceutical sector. Additionally, Pfizer has a lot to offer, including strong long-term growth prospects and a tempting dividend.
The pharmaceutical company may be underperforming the market this year, but a closer examination of the business reveals that it is a wise investment for the long run. See why, will we?
Thinking past the pandemic
This year, some COVID-19 vaccination leaders have significantly underperformed the market. Both Moderna and Pfizer’s associate BioNTech are on this list. Investors appear to be concerned about this sector’s dubious long-term prospects. After this year, there will almost surely be a decline in the market for coronavirus vaccinations, and it’s possible that these businesses won’t be able to maintain their recent surge in sales and profits.
This argument has some merit, however Pfizer differs from Moderna and BioNTech in that it offers a wide range of products unrelated to coronaviruses. However, the company’s lineup as a whole isn’t doing that well.
On an operational level, Pfizer’s overall revenue in the first quarter climbed by 53% year over year to $27.7 million. However, excluding the contribution from its COVID-19 products, the company’s operational revenue only increased by 1% year over year. Significantly less impressive.
Nevertheless, even though the need for coronavirus vaccinations and treatments may decline starting next year, it won’t disappear entirely. Most likely, people will keep looking for protection from COVID-19, especially those who are most susceptible to problems. Those who get sick will still have access to treatments.
There is some indication that COVID-19 has a substantially greater fatality rate than the flu, despite the fact that the two diseases are spread identically. Every year, patients receive flu injections to protect themselves. We may, therefore, reasonably anticipate individuals doing the same for COVID-19 going forward. Because of this, Pfizer’s products in this sector will continue to bring in some money and enable the company’s overall sales to move in the correct direction.
In 2023, Pfizer will have difficult year-over-year comparisons, but after that, the company’s current product line should still be able to provide positive results.