Can Pfizer Outperform in 2014?

After tracking the index for five years, Pfizer could be worth buying. Here's why.

Mar 17, 2014 at 9:30AM

Since the bull run of March 2009 commenced, Pfizer (NYSE:PFE) has closely tracked the performance of the S&P 500, both of which are up about 155% over the last five years. But can Pfizer deliver outperformance in future? Or will it continue to mirror the index?

News flow
News flow surrounding Pfizer's pipeline in 2014 has been somewhat mixed. For example, management continues to be upbeat regarding its breast cancer drug, palbociclib, as well as a pneumonia vaccine called Prevnar 13. The latter was reported to have met its objectives in February in a trial that tested the effectiveness of the vaccine in 85,000 patients aged 65 or older against pneumonia. In addition, Pfizer's breast cancer drug has the potential to increase revenue by around $3 billion per annum should it be approved by the FDA. Developments on both drugs have the potential to impact shares positively during 2014.

But 2014 has not been all upbeat for Pfizer. For instance, its potential treatment for an advanced form of lung cancer, dacomitinib, missed its main goals in two late-stage studies in late January. The drug failed to show a statistically significant improvement in progression-free survival in a study comparing it with the treatment erlotinib. Moreover, it also missed the aim of prolonging overall survival when compared to a placebo in the second study. The results from a third study are expected later this year and could impact Pfizer's share price.

Relative valuation
Pfizer seems to offer good value for money at current price levels. For instance, using the EV/EBITDA metric -- which divides a company's enterprise value by earnings before interest, tax, depreciation, and amortization -- Pfizer compares favorably to sector peer, Bristol-Myers Squibb (NYSE:BMY). While Pfizer's EV/EBITDA ratio is 9.1, Bristol-Myers Squibb's is 22.8 -- highlighting the considerable difference in valuations between the two stocks.

A key reason for this is the strength of Bristol-Myers Squibb's share price over the last five years. While Pfizer is up 155%, Bristol-Myers Squibb is up over 200%, and this is in part evidenced by an EV/EBITDA ratio that is far in excess of that of Pfizer. Furthermore, news flow for Bristol-Myers Squibb has been upbeat in 2014, with the company announcing that a phase 3 study of a combination of Yervoy and immunotherapy treatment nivolumab will commence before the end of 2014.

This is very positive news for Bristol-Myers Squibb because pressure had been mounting on the company to state when it would progress to a phase 3 trial with the drug -- especially after a scientific-research team from Dana-Farber Cancer Institute and Johns Hopkins put together statistics regarding patients with melanoma who have taken nivolumab that were highly encouraging. Further developments surrounding nivolumab could have a major impact on the future share price of Bristol-Myers Squibb.

A potentially better opportunity?
While Pfizer's EV/EBITDA ratio is more attractive than that of Bristol-Myers Squibb, sector peer
AstraZeneca's (NYSE:AZN) EV/EBITDA ratio is yet more appealing. While Pfizer's is 9.1, AstraZeneca's EV/EBITDA multiple is 8.7, meaning that shares in the U.K.-listed stock are cheaper by this metric than those of Pfizer.

News flow for AstraZeneca has also been upbeat recently, with the FDA approving a drug in late February to treat rare and potentially fatal disorders involving the loss of body fat. The drug, Myalept, has been developed in partnership with Bristol-Myers Squibb and has been approved as a replacement therapy to treat complications caused by leptin hormone deficiency in patients with congenital generalized lipodystrophy. This involves a loss of fat tissue, leading to low levels of leptin, which can ultimately cause diabetes and pancreatitis. In addition, the FDA also approved the Bydureon Pen, which is the first and only once-weekly medicine for adults with type 2 diabetes and provides powerful blood glucose level reduction.

Looking ahead
While AstraZeneca's EV/EBITDA ratio is lower (and, therefore, potentially more attractive) than Pfizer's, this doesn't detract from Pfizer's appeal to me. Similarly, Bristol-Myers Squibb may not be as attractively priced as its two peers but still represents a sound investment opportunity.

Furthermore, while Pfizer's news flow of late has been rather mixed, the company still looks all-set to have a strong 2014. Sure, it has tracked the index over the last five years, but a relatively attractive EV/EBITDA ratio of 9.1 seems to highlight that Pfizer could be undervalued. As such, it could have a great 2014.

Should you own Pfizer forever?
It's no secret that investors tend to be impatient with the market, but the best investment strategy is to buy shares in solid businesses and keep them for the long term. In the special free report "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.

Peter Stephens owns shares of AstraZeneca. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers