A value stock is a label given to companies that trade at low multiples relative to their earnings and growth potential. Many investors consider them to be a great way to minimize risk in an arguably overvalued market.

Let's explore the reasons why Pfizer (PFE 1.39%) and Philip Morris International (PM 0.01%) could make great additions to your investment portfolio because of their low valuations and exciting new growth drivers. 

1. Pfizer 

Pfizer is a global healthcare giant known for blockbuster prescription drugs like Lipitor, Eliquis, Prevnar, and Enbrel. But now it's making headlines for a different reason: its coronavirus vaccine. Pfizer's vaccine, BNT162b2, boasts key advantages over its rivals and could drive significant top-line growth as the virus continues to spread and mutate. 

COVID-19 vaccines and money

Image source: Getty Images.

The U.S. has administered over 100 million doses of coronavirus vaccine and orders for hundreds of millions more doses and is working to reach herd immunity as soon as the fall, according to Dr. Anthony Fauci, director of the U.S. National Institute of Allergy and Infectious Diseases and the chief medical advisor to the president. But virus cases are once again surging in some parts of Europe and Asia -- with COVID-19 variants driving a third wave of infections.

BNT162b2 is well suited for tackling this challenge because of its adaptability and high efficacy rate of up to 97%. According to Ugur Sahin, CEO of Pfizer's partner BioNTech, the company's mRNA vaccine platform is flexible and can "technically develop booster vaccines within weeks, if needed." BNT162b2 faces less regulatory pushback than a rival vaccine developed by AstraZeneca, which has been paused in several countries because of a potential link with blood disorders. 

Pfizer will face stiff competition from Moderna's vaccine, mRNA-1273, which boasts an efficacy rate of 94% and is the only other mRNA-based vaccine approved for emergency use in the U.S. However, Pfizer expects to add $15 billion in revenue from its coronavirus vaccine this year, and the company is guiding for earnings of as much as $3.20 per share in the period. The stock currently trades at just 11 times that projection, making it an outlier in the S&P 500, which trades at an average of 40 times earnings. 

2. Philip Morris International

Tobacco is a recession-proof industry, and Philip Morris International is an excellent example of this concept. The cigarette maker held up well during last year's economic downturn. And it looks poised to generate long-term growth as it executes its pivot to reduced-risk products

While net revenue declined 3.7% to $28.7 billion in 2020, operating income grew 11% to $11.6 billion because of price hikes, improvements in manufacturing productivity, and the growing proportion of heated tobacco unit (HTU) sales. HTUs now represent 11% of total shipment volume, with the flagship IQOS heated tobacco platform representing 24% of net revenue -- up from 19% of revenue in the prior-year period. 

IQOS is a tobacco product that releases nicotine without combustion, earning it a reduced-risk marketing authorization by the FDA. The IQOS platform could also drive margin growth because of cost efficiencies in its production. 

Philip Morris International expects earnings per share (EPS) of up to $6 in 2021, which would be 16% above the prior year. Management plans to return value to investors through a dividend (which currently yields 5.4%) and a buyback program aiming to repurchase $5 billion to $7 billion worth of shares starting the second half of the year. Philip Morris International stock trades at an attractive valuation of just 15 times forward earnings, making it a great pick in this pricey market. 

Bang for your buck 

The stock market is trading at an unusually high valuation, and investors should look to value stocks as a potentially safer bet. Pfizer and Philip Morris International boast defensive business models that can hold up in this uncertain economic environment, and both companies currently offer dirt-cheap valuations.