Justin (00:00): So, you clicked on this video because you want to know what the Pfizer price will be doing, and you want to know if you should buy, hold, or sell, Pfizer. So, in this video, we're going to go over some fundamentals. We’re going to have a look behind the company statistics, and we're going to give you a buy, sell or hold recommendation at the end of this video. I'm also going to provide you with my personal price prediction for Pfizer at the end of this video. But first, before we jump into the fundamental analysis, if you are new to the channel, please be sure to click on the subscribe button and also consider turning on all your notifications by clicking on that bell notification. With that said, let's quickly jump into the fundamentals here.
(00:39): So, Pfizer is currently trading at $37, give or take, and we are trying to delve into the stock and figure out what it's going to be doing during the course of this year. So, one of the first things I like to do is go and have a look at the actual fundamentals behind the company and then take a look at the non-fundamentals. So first of all, let's look at the company’s fundamentals, what we know and what we can take from the current statistics. So, to do this, I have a share valuation sheet that I run. It's my own personal way of valuing shares, and it's a way for me to assimilate and put together all the fundamentals to help me make fundamental decisions. So, one of the first things we're looking for is the P. E. ratio. We want to figure out the P. E. ratio and make sure that the P. E. ratio is less than 20. Anything more than 20 will indicate that the company is slightly overvalued, in terms of its share price, in terms of what people are valuing it, and if the company is being driven by sentiment or fundamentals, so currently, if we go and have a look at the statistics on Pfizer, what we can see is that the current P. E. ratio is 24, so definitely, there is a little bit of sentiment driving the value in the company at the moment. The next thing I want to have a look at is taking a look at the profit margins and want to make sure that they're operating on profit margins of more than 10%.
(02:07): So, I currently am using eToro, and if you scroll down to the bottom, you'll basically get their net profit margin. This is their operating margin, and they're currently working at about 26%, which is definitely above 10%, so it definitely checks that box. Then I also want to have a look at the assets and liabilities. We want to make sure that the asset ratio is much higher than liabilities. So, we're going to click on the balance sheet, have a quick look, and we can see currently there is 178 billion in assets and 113 billion in liabilities. So definitely, that box is checked. And then the next thing is, we want to go and have a look at revenues. We want to look at total revenue, gross profit, operating income and net income. And what we want to try and look for is that there is consistent growth over a three-year period. So, obviously, if we go over to the statistics and look at the income statement, we can see a total revenue 12.6, 12.3, 11.3, 12.1. So a little bit inconsistent. Gross profit pretty much the same thing 9.7, 9.6, 8.6, and 8.7. So sort of up and down. The consistency isn't there for me. Then, operating income, 2.4, 4.1, 3.5 and 3.8. Again, a little bit inconsistent, and net income is sitting at 3.4, 3.4, and then 2.2. So definitely, those boxes aren’t checked for me. The revenue seems to be a little bit off over the last three years. Then the next thing we want to have a look at is cash from operating activities. So this is really cash generated out of their core business. And so, if we head over here to the cash flow statements. Again, see cash from operating activities 3.5 and then 2.9. So, again, you know, it doesn't look as if it's on the up and up. It seems that their net operating cash is slightly on the downside, and obviously, we've had pandemic; we’ve had a lot of things going on, so there may be some explanations for that.
(04:16): The next thing we want to have a look at is the free cash flow growth. Now, the free cash flows really a very intricate calculation which I do aside from all the statistics and stuff that's usually provided. What you're looking at is cash from operations. So that's your operational cash, less the net expenditure on capital. And that will give you your net cash flows and tell us how much the free net cash flow is in the business. So, essentially if we take, you know, this last year, 12. 5 billion in net cash flows from operations, less net capital expenditure of 2.5 billion. That puts us about 10 billion there about on net free cash flows. And really, we want to make sure that that has sort of been going steadily up over the last three years. If I go back here to the Pfizer statistics, we look at 12.5, 2.9, 15.8, 2.1,16.8, and 2.2. That indicates over the last three years. The free cash flow has been going down a little bit. So that's a little bit of a worry again. So definitely, there are some cash flow issues; cash flow has not been as great as it has been in the past. So again, it doesn't check that box.
(05:38): The next thing we want to have a look at is the number of outstanding shares. Now, this for me is a very important calculation because, essentially what it indicates is, if the number of shares outstanding is coming down over time, it means that the company's exercising its right to purchase back some shares, and very often, that is a strong indication of confidence within the company from within. So, again if we head over to the statistics around this, we will see that the outstanding shares have been going down on average over the last three years, so 5.97, 5.82, and 5.69 billion shares an excellent indication that the company has confidence within itself. So, a very key fundamental that you want to have a look at.
(06:28): And then, what I like to have a look at is the dividend cost versus the free cash flow. This is a little bit of complex calculation that I do, but essentially what I'm looking for is to make sure that the company can afford its dividends. Now, this is a straightforward calculation to do in terms of the dividend yield. So, what you do is you take the dividend yield of 4.1% multiplied by the total market cap, which is 206 billion. And that means that they had a dividend payout of 8.48 billion. What we want to figure out is, were they in a strong cash position to pay out those dividends, or were they leveraging some kind of debt to pay out those dividends. So, if we go here and we look at the free cash flow. Again that calculation is worked out as follows: Cash flow from operations, less capital expenditure, and that gives you your free cash flow. So they had cash flow from operations 12.5 billion, capital expenditure was 2.59 billion and free cash flow 10 billion. So 10 billion free cash flow is definitely more than the dividend payout of 8.4 billion. So, yes, that box is checked. That’s definitely a go. Then what I want to look at in this is something unique that I do in my share prices when I look for value when I look for long-term positions. I have a look at how the share price has performed over the last decade. I want to see that over the last decade. The share price must have at least doubled in the previous 10 years. So, if we go to the charts, and we basically pull up the last decade, we can have a look here in 2010. The share price was sitting at about 13 bucks. Today we sitting at 37, so yes, it has definitely doubled. And that means that that's a go. So, on the side here, you'll see I've got a little summary of where I think things are going. So short-term buy-score for Pfizer 38%, short term sell-score is 53%.
(08:37): So if you actually value this purely on the fundamentals, you would probably say it's time to sell Pfizer. But, and this is where the big BUT comes in. Obviously, you have to take things into consideration outside of the fundamentals. And so, outside of the fundamentals, we have to consider that Pfizer is on a big drive around the COVID-19 vaccines. We have to consider there's a lot of government intervention. We have to consider what the pricing might be around those vaccines, are they going to be government-controlled, aren't they going to be government-controlled, is there going to be enough profit in it. My personal prediction for Pfizer is that yes, it's a buy, but it's a buy and hold. This is definitely not something you want to go into short term. If you're looking for six months trade, if you're looking for anything less than that, a three months trade, Pfizer is definitely not your stock. If you're going to go into this for a more extended period of time, you know, if you're looking to hold beyond six months, a year, two years, three years, definitely, Pfizer is a go. So, my personal prediction, 12 months, I think that Pfizer will be around $50 per share. That's my prediction for Pfizer in the next 12 months. That having been said, the industry is currently projecting about $41. So, my valuation is slightly over that, and I think I’m fairly conservative. I'm taking into account what might happen around legislation for the COVID-19 vaccinations.
(10:03): Obviously, Pfizer is very well known for Viagra. It's the thing that’s really put them on the map in the last few years, and there is a significant rebranding exercise going on around Pfizer so they can position themselves as more than just the little blue pill. So absolutely, I think this is a buy long term. I suggest you take a look at it for yourself and make your own decision, but if I were in the market right now looking for a value stock, then definitely Pfizer has to be at the top of that list irrespective of what the fundamentals say. The fundamentals probably tell everybody to sell, and many people will be dumping this stock over the next couple of months. I think that's an excellent opportunity to jump in and to buy. And in the up-and-coming videos, I’m also going to talk about where you should be hedging in terms of alternative stocks if Pfizer doesn't work out. So, if you enjoyed this video, please click on the like button, make sure to subscribe to the channel for all future notifications and videos that we send out. All you have to do is click on that subscribe button now, click on the bell icon to turn on all notifications for the channel, and let me know in the comment section below. Are you going to be buying Pfizer? Do you currently own Pfizer? And what are your personal predictions for Pfizer?