Pharmaceutical giant Pfizer (NYSE:PFE) has been on a lot of investors' minds over the past 12 months. The company's breakthrough COVID-19 vaccine brought it to the forefront of national attention, and the stock performed nicely in 2020. I believe it can be successful in 2021 as well.

Vaccine success

When the COVID-19 pandemic rocked the world, Pfizer stepped up and delivered. Within less than a year, Pfizer and BioNTech had entered into a joint partnership and developed the first vaccine to be approved under a U.S. Food and Drug Administration Emergency Use Authorization (EUA), on Dec. 11, 2020. 

Since then, the world has placed several billion orders for the Pfizer/BioNTech COVID-19 vaccine, with the European Union currently in negotiations with the two companies for a third COVID-19 vaccine contract for almost 1.8 billion doses. This mega-contract would see the delivery of the vaccine to the European Union from 2021 until 2023.

Pfizer stands to benefit over the next few years from its partnership with BioNTech on this breakthrough vaccine. In Pfizer's first-quarter earnings report, CEO Albert Bourla said first-quarter sales from just the COVID-19 vaccine brought in $3.5 billion, accounting for about 24% of revenue. Additionally, the company outperformed analyst expectations, reporting $0.93 in EPS and total revenue of $14.58 billion for the first quarter of 2021. Management also noted that sales for the full year from the vaccine alone should reach about $26 billion. This was revised up from the previous estimate of $15 billion.

Pfizer has been struggling to increase sales over the past five years, with average revenue growth over that time sitting at an abysmal 0.05%. The commercial success of its vaccine will make it a great driver for growth well into the future. In addition to its possible contract with the EU, Pfizer has reached an agreement with Canada for about 65 million doses through 2023. The company has just received approval from Health Canada, the department that sets Canada's national health policy, for treating adolescents age 12 to 15 with the vaccine.

The FDA has also recently given emergency authorization to Pfizer's COVID-19 vaccine to include people ages 12 to 15. The company is still seeking full approval (rather than authorization) from the agency; if achieved, this would mean the FDA had ruled that the vaccine's benefits outweigh the known risks following a review of Pfizer and BioNTech's testing results. If Pfizer does receive full approval, it would only apply to the vaccine for people who are 16 and older. However, people aged 12 and above could still receive the vaccine under an EUA if they chose to do so.  

Gloved hands deliver a shot to a patient's arm.

Image source: Getty Images.


Future growth

Pfizer's growth over the next few years will be largely dependent on the way it cycles the revenue from the vaccine into the other parts of its business. Beyond the vaccine, its current lineup looks very robust, with many avenues for contribution to the future growth investors will be looking for.

Three of its four main drugs -- Eliquis (for blood clots), Vyndamax (for heart failure), and Xeljanz (for psoriatic arthritis) -- saw remarkable year-over-year growth in Q1, with jumps of 25%, 88%, and 18% respectively. Sales of the fourth, Ibrance (for breast cancer), were down 1% from last year. These drugs have been key drivers for Pfizer's current and near-term growth while the company develops other key products in its pipeline.

One such product that I think will do very well is its new approach to the traditional flu vaccine. According to the CDC, flu vaccines have historically been only 40% to 60% effective, and Pfizer is looking to increase that number by creating a new and better flu vaccine using the mRNA technology that was used to create its COVID-19 vaccine. Ideally, this would be a much more effective version of the already existing protein-based flu vaccines. 

This venture would be very lucrative for the company -- the Centers for Disease Control estimates that flu accounts for 9.3 million illnesses, 140,000 hospitalizations, and 12,000 deaths in the U.S. alone. The profit incentive for Pfizer would be notable, as flu vaccine costs range up to almost $40 a shot . The U.S. flu market alone is $7.3 billion, and Pfizer could have a great opportunity to grab market share. The company will be starting clinical trials with its mRNA flu vaccine in the third quarter of this year.

If successful, I think this will be a high-revenue-generating product that could provide recurring income, as many people receive annual flu vaccines. There are still lots of questions concerning mRNA vaccines for the flu, and Pfizer has indicated it will take a few more years before anything will be ready for the market. 

Pfizer also has several drugs in clinical trials in its vaccine, immunology, oncology, and rare disease business lines that could be released over the next few years. This would provide a much-needed boost to Pfizer's ability to grow revenue.

The company adjusted its financial guidance for 2021, raising its revenue expectations from $59.4 billion to $70.5 billion. It also raised its guidance for adjusted diluted earnings per share from $3.10 to $3.55. All this good news definitely does give Pfizer investors some optimism regarding future growth. The future looks bright. 

A buy right now

Pfizer has been trading at a forward price-to-earnings ratio of about 13 over the past few years. That number is currently at 10.86, indicating Pfizer is undervalued at these prices.

Taking Pfizer's earnings-per-share estimates for the next fiscal year of $3.22 and its usual market valuation of a 13 P/E, we would get a $41.86 share price. This is a 5.76% price appreciation should the stock return to fair value. Pfizer also boasts one of the nicer dividend yields in the industry at 3.89%, almost triple the SPDR S&P 500 ETF dividend of just 1.3%. In today's market, investors are looking for opportunities to outperform the broader index. With Pfizer trading at a deep discount, buying into this stock could help your portfolio beat the market over the next few years.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.