Will pharma giant Pfizer (PFE 0.92%) run out of steam? The company's shares have soundly outperformed the market in the past year, mainly due to its COVID-19 vaccine, Comirnaty, which it developed in collaboration with BioNTech. However, investors may worry that once Pfizer's coronavirus tailwind comes to a halt, the company will see much darker days.
This could put downward pressure on the company's shares. While that's a legitimate worry, there are excellent reasons to be optimistic about Pfizer's future. Here are just two of them.
1. Plenty of cash
Pfizer generated $36.8 billion in revenue from Comirnaty in 2021. For context, the company's total revenue for 2020 came in at $41.7 billion. The impact of Comirnaty on the drugmaker's financial performance can hardly be overstated. It ended 2021 with revenue of $81.3 billion, representing a 95% year-over-year (YOY) increase. For a pharmaceutical company the size of Pfizer, this level of YOY top-line growth is rare.
The company's adjusted income nearly doubled to $25.2 billion. Naturally, Pfizer's free cash flow also soared during the year. The company ended 2021 with $29.9 billion in free cash flow, which grew by 122% compared to the previous year. Pfizer's colossal cash pile will allow it to look for new business opportunities, perhaps by purchasing promising pipeline candidates from other drugmakers.
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During the company's fourth-quarter earnings conference call, CEO Albert Bourla said the following: "The strength of our balance sheet and cash flows allow us to pursue new business development opportunities going forward that could add at least $25 billion of risk-adjusted revenues to our 2030 top-line expectations."
That's important since Pfizer's business minus its coronavirus portfolio isn't performing nearly as well. For 2021, the pharma giant's revenue, not including Comirnaty and its COVID-19 therapy Paxlovid, increased by a much less impressive 6% YOY to $44.4 billion. Thankfully, Pfizer's coronavirus windfall will help strengthen the rest of its business in the coming years.
2. Still attractively valued
Few pharma giants have performed nearly as well as Pfizer over the past 12 months. That's understandable, given the company's impressive year in terms of its financial results. But despite this performance, Pfizer remains attractively valued. The company's current price-to-earnings (P/E) ratio stands at a very modest 7.3. Meanwhile, the average for the pharmaceutical industry is 11.7.
NYSE: PFE
Key Data Points
Pfizer looks more attractively valued than many of its peers. The company still has significant upside left at current levels, even after soundly beating the market in the past year.
Pfizer's shares are worth buying
Pfizer's coronavirus tailwind isn't over. The company expects to generate roughly $32 billion in revenue from Comirnaty this year and an additional $22 billion from Paxlovid. Thanks to these products, the company should exceed the ridiculously high bar it set last year. The drugmaker expects revenue between $98 billion and $102 billion for 2022, which would represent a YOY increase of 23% at the midpoint.
Perhaps Pfizer's revenue will eventually fall off a cliff as the pandemic (hopefully) subsides. Still, investors shouldn't overlook the impact both Comirnaty and Paxlovid are having on its ability to replenish its lineup and its pipeline and build a solid foundation to support growth for many years to come.
Let's also not forget about the company's dividend profile. It currently offers an above-average yield of 3% and a very conservative cash payout ratio of 29%. With the cash flow it is generating, Pfizer is more than capable of sustaining further dividend increases. That means the company is an excellent option for income-oriented investors, too.
Pfizer offers growth, value, and dividends -- and that's what makes it one of the more attractive pharma giants right now. Investors focused on the long game can't go wrong with this company.
