The biopharmaceutical products manufacturer Pfizer Inc. (PFE - Get Rating) became an iconic leader in the pharmaceuticals industry with its breakthrough in COVID-19 vaccine development, along with German company BioNTech. 

PFE’s stock has surged 5% year-to-date, and 9.3% over the past month, on the back of solid financial prospects for its COVID-19 vaccine and double-digit operational revenue growth driven by developments in its therapeutics area.

In fact, the FDA’s recent approval of its supplemental New Drug Application (sNDA) for LORBRENA has further strengthened the pharma giant’s position in the drug development market. We think investors’ bullish sentiment on the biopharma business in general, and on PFE’s prospects, should help PFE see solid upside in the coming months.

Click here to checkout our Healthcare Sector Report for 2021

Here is what we think could shape PFE’s performance in the near term:

Favorable Biotech Industry Outlook

The COVID-19 pandemic generated heightened demand in the biopharmaceuticals industry, and the race to develop  COVID-19 vaccines specifically  accelerated the sector’s growth potential. Widespread government funding and increased R&D spending have fostered a positive environment for  biopharmaceutical companies to develop breakthrough drugs and therapeutics. As such, biopharma giant PFE is well positioned to take advantage of the strong industry backdrop and drive solid shareholder value.

PFE’s supplemental New Drug Application for LORBRENA for the treatment of people with anaplastic lymphoma recently received FDA approval. The approval should establish the company as a pioneer in delivering biomarker-driven therapies and address the needs of patients with non-small-cell lung cancer.

Reasonable Valuation

In terms of non-GAAP forward P/E, PFE is currently trading at 11.64x, 54% lower than the industry 25.29x average. The stock’s forward price/sales and price/book multiples of 3.51 and 2.93, respectively, are 52.8% and 38.7% lower than the 3,51 and 2.93  industry averages.

PFE’s 10.1x forward EV/EBITDA ratio is 41% lower than the industry average 17.11.

Impressive Financials

PFE’s revenues have increased 12% year-over-year to $11.68 billion in the fourth quarter, ended December 31, 2020. It reported $594 million in  net income, compared to a net loss of $337 million in the fourth quarter of 2019. Its EPS came in at $0.10 for the period. The company’s revenue from vaccines rose 17% from the prior-year quarter to $2.0 billion. And its  rare disease revenue grew 26% year-over-year to $865 million.

Consensus Price Target Indicates Potential Upside

Of 20 Wall Street analysts that rated the stock, two rated it Strong Buy and five rated it Buy. Analysts expect the stock to hit an average price target of $40.69 in the near term, representing a potential upside of 5.3%. 

POWR Ratings Indicate Solid Prospects

PFE has an overall B rating, which translates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight different categories. The stock has a B grade for Value, Stability and Quality. PFE’s lower-than-industry P/E ratio accounts for the Value grade. Its higher-than-industry gross profit margin is in sync with the company’s Quality grade. Also, its lower volatility justifies the Stability grade.

In addition to the grades we’ve highlighted, one  can check out PFE Ratings for the Sentiment, Growth, and Momentum here.

The stock is ranked #21 of 232 stocks in the Medical – Pharmaceuticals industry.

If you’re looking for other top-rated stocks in the same industry, with an Overall POWR Rating of A or B, you can access them here.

Bottom Line

With the COVID-19 vaccine becoming a source of recurring revenue for PFE, along with its  pipeline of new drugs and transformative medicines, it is uniquely positioned to witness strong growth in the near term. Furthermore,  the stock’s reasonable valuation and superior financials should help it perform better in the coming months. Hence, we think the stock is an ideal investment option now.

Click here to checkout our Healthcare Sector Report for 2021

PFE shares were trading at $38.58 per share on Monday morning, down $0.08 (-0.21%). Year-to-date, PFE has gained 5.95%, versus a 12.12% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...

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