One of the great things about investing in stocks is that you don't need millions of dollars in the bank to get started. You can get your hands on quality stocks with as little as $100 -- or even less. That's especially the case now, considering the recent downturn. The broader market continues to struggle, and now is as good a time as any to get relatively cheap stocks.
Let's look at an incredible healthcare stock whose shares are changing hands for just about $44 (as of this writing): Pfizer (PFE 0.55%). This leader in the coronavirus vaccine and therapy market is a steal at current levels. Here's why.
Recent financial results
Pfizer is a major pharmaceutical company with a rich lineup of medicines and vaccines. However, some of the company's key products are currently facing issues.
For instance, immunology drug Xeljanz has seen its sales decline recently. Xeljanz, part of a class of drugs known as JAK inhibitors, was found to be associated with a higher risk of heart-related events and cancer than another category of medicines, TNF inhibitors. Last year, regulators in the U.S. started requiring that companies that market certain JAK inhibitors add warnings regarding these risks, which negatively impacted their revenue. In the second quarter, partly due to this issue, sales of Xeljanz dropped by 27% year over year to $430 million.
But that's not the only one of Pfizer's products that's facing problems. During the second quarter, the company's non-coronavirus portfolio saw its sales increase by a meager 1% operationally compared to the year-ago period.
Pfizer's business is still performing well overall, thanks to its COVID-19 vaccine Comirnaty and its therapy for the illness, Paxlovid. Pfizer's total revenue jumped by 47% year over year in the second quarter to $27.7 billion. That's impressive, especially considering that Pfizer's results last year were already abnormally high thanks to Comirnaty. On the bottom line, Pfizer reported earnings per share of $1.73, 77% higher than the prior-year quarter.
Revenue growth will eventually drop back down to Earth when the pandemic subsides. To be clear, the company's sales of its COVID-19 products won't completely stop, as the illness is almost certainly here to stay. But as we exit the state of emergency we were in as a result of the pandemic, the demand for vaccines and therapies for COVID-19 will drop. Thankfully, Pfizer has already generated billions due to its success in this space, and it's investing these funds into various initiatives to strengthen its business.
In it for the long haul
To continue to be successful long after the pandemic ends, Pfizer will need newer products that can sustain revenue growth for years. The company is working on developing innovative vaccines and medicines, some of which it acquired relatively recently.
Consider its phase 3 pipeline, featuring such products as etrasimod, a potential treatment for ulcerative colitis. Pfizer got its hands on this candidate through its March acquisition of Arena Pharmaceuticals for $6.7 billion in cash.
Other new molecular entities in Pfizer's late-stage pipeline include investigational alopecia treatment ritlecitinib, and a potential mRNA-based influenza vaccine. The company boasts many more programs in earlier stages; overall, the drugmaker is running 96 clinical trials.
But Pfizer likely isn't done shoring up its lineup. At the end of last year, it promised to be very active in mergers and acquisitions. It has held to that promise so far, and more deals are likely on the way for the pharma company. What that means for investors: Pfizer's pipeline is already strong and will only get stronger -- and it should deliver exciting products within the next five years.
The company's sales might drop next year compared to this year and the last, two abnormal periods in Pfizer's history. But its revenue will remain northbound once the pandemic years are well behind us.
Lastly, Pfizer's shares are cheap even by conventional valuation metrics. The company's forward price-to-earnings (P/E) ratio is just 6.8, while the average forward P/E for the industry stands at 12.5.
Pfizer may have underperformed the broader market this year, but the company has the tools to turn things around -- at least for investors willing to be patient.
