Investing in a top pharmaceutical company such as Pfizer (PFE -1.25%) might seem like a good long-term hold. Unfortunately, that hasn't been the case in recent years. In the past five years, it has lost close to 40% of its value.
Many investors are torn about whether it's a good value buy or just a trap, given the question marks about its long-term future. Here's why I think the stock could be a great buy-and-hold investment right now.
Image source: Getty Images.
Concerns about its future growth may be overblown
Pfizer's business isn't nearly as big as it was when its COVID-19 vaccine and pill were generating monstrous numbers. But what I find encouraging about its operations is that it has been investing in other companies over the years, in an effort to diversify and strengthen its long-term growth prospects. Pfizer is facing patent cliffs, but its CEO has been deploying a strategy to address that and to enable the business to grow in the long term.
The company's revenue was up just 1% (operationally) in its most recent quarter, which ended on June 28. That was, however, even as it experienced declines in many of its products. The silver lining is that the company says it generated 25% of its operating growth from acquired products, including those it obtained from oncology company Seagen back in 2023.
In addition to acquisitions, the company has been investing in its pipeline, which may create catalysts that could further boost its top line in the future. One of its most promising is berobenatide, a weight loss drug that it acquired from Metsera. It is a monthly treatment option, and if it obtains approval, it could quickly give growth investors a reason to be much more bullish on Pfizer's future.
NYSE: PFE
Key Data Points
Pfizer is a stock I'd just buy and forget about
Although Pfizer's stock is up 14% this year, its valuation remains low, as it trades at just 10 times its estimated future earnings, based on analyst projections; there's still far more upside for the stock. It can take a while for investors to recognize the value it offers, but when that happens, the stock could quickly take off.
In the meantime, its yield remains high at around 6.1% -- that will come down if its share price rises. Thus, there's ample incentive to buy now while the stock price is relatively low and the yield is high. Pfizer can be a good long-term buy-and-forget investment, as its dividend can provide investors with a strong incentive to remain patient.
