Some investors could look at the relative momentum to pick between two stocks. For example, Pfizer (PFE -0.61%) has been a much bigger winner than Moderna (MRNA -0.18%) over the past several months.
Others think that stocks often revert to their mean. Since Moderna's shares have fallen a lot more than Pfizer's shares have, investors may put their money on Moderna bouncing back.
But there are much better criteria to use than share-price movement in choosing between these two vaccine stocks. Here are five reasons Pfizer is a better stock to buy right now than Moderna.
1. Less risky
Behavioral-economics research has shown that people usually feel more pain from losing money than they experience joy from gaining the same amount. This should make stocks that are less risky more attractive to most investors than stocks with greater risk.
Moderna is indisputably riskier than Pfizer. The company's COVID-19 vaccine currently generates all of its revenue. Pfizer has multiple sources of revenue. This is especially important considering the uncertainties about what the long-term demand for COVID-19 vaccines might be.
2. More near-term growth drivers
Despite a general aversion to risk, investors still accept risk when the prospects of positive returns are great enough. Those positive returns require growth drivers -- and Pfizer has more of them over the near term than Moderna.
Moderna doesn't have any near-term growth driver other than its COVID-19 vaccine. As previously mentioned, how much growth the vaccine will generate is up in the air.
Pfizer, though, had more than 20 products that delivered double-digit percentage year-over-year sales gains in the third quarter of 2021. Most of these products are likely to keep the momentum going this year.
In addition, Pfizer's COVID-19 pill Paxlovid will be another huge commercial success for the company. Pfizer has already received orders from the U.S. government for 20 million treatment courses of the oral therapy.
3. Much bigger pipeline
Moderna could have plenty of growth drivers over the longer term, as its pipeline includes 15 clinical programs outside of its COVID-19 vaccine efforts. The company thinks its most advanced of these candidates, cytomegalovirus (CMV) vaccine mRNA-1647, could achieve peak annual sales of up to $5 billion.
However, Pfizer's pipeline is much bigger. The drugmaker has more than 90 clinical programs, and over 30 of them are either awaiting regulatory approval or in late-stage testing.
Those numbers don't include Pfizer's recent business-development deals. The company announced in December 2021 that it plans to acquire Arena Pharmaceuticals. Pfizer also just expanded its partnership with BioNTech to develop a messenger RNA vaccine for shingles, with clinical testing expected to begin later this year.
4. More attractive valuation
Pfizer has less risk and more growth drivers both near term and long term, so you might expect that its shares would command a premium valuation compared to Moderna. But that's not the case.
Moderna's shares currently trade at 9.2 times sales. Pfizer's price-to-sales multiple is only 4.2. It also has a more attractive valuation based on earnings, with a price-to-earnings (P/E) ratio of 15.3 versus Moderna's P/E of 15.8.
Granted, these metrics are based on trailing-12-month figures. Moderna stock looks more appealing looking forward. Its shares trade at 10.6 times expected earnings, compared to Pfizer's forward P/E multiple of 11.1.
However, we again have to remember the big question marks surrounding the future demand for COVID-19 vaccines beyond 2022. Pfizer's earnings over the next few years are much more solid than Moderna's are.
5. A great dividend
We also can't overlook Pfizer's great dividend, which it has paid for 331 consecutive quarters. Its dividend currently yields north of 2.8%. The yield would be even higher, but Pfizer stock has soared close to 50% over the past 12 months. Moderna doesn't offer a dividend at this point.
Expect Pfizer's dividend to get even better going forward. CEO Albert Bourla said in the company's third-quarter conference call: "We are maintaining a growing dividend. That's very clear."