Pfizer Equity Analysis & Valuation

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Pfizer Equity Analysis & Valuation Table of Contents Executive Summary……………………….….….2 Business and Industry Analysis…….…………..7 Industry Overview………………………...7 Five Forces Model………………….……..8 Key Success Factors……………………..10 Firm & Industry Conclusions……………11 Accounting Analysis……………………………13 Key Accounting Policies………………...13 Degree of Flexibility...........................…...16 Actual Accounting Strategy……………...17 Quality of Disclosure…………………….19 Ratio Analysis & Forecast Financials…………25 Financial Ratio Analysis…………………25 Financial Statement Forecasts……………37 Valuation Analysis……………………………...39 Cost of Capital…………………………...39 Intrinsic Valuation Methods……………..41 Method of Comparables…………………46 Appendix………………………………………..49 References………………………………………71 1
Pfizer, Inc. Mo Money Rusty Klein Justin Kime Rene Jimenez Todd Johnson Investment Recommendation Under-Valued Date of Valuation 4/1/2005 PFE - NYSE (4/13/2005) $27.28 EPS Forecast 52 week price range $21.99 - 37.90 FYE 12/31 2004(A) 2005(E) 2006(E) 2007(E) Revenue(2004 $52.5B EPS $1.87 $1.70 $1.93 $2.09 Market Capitalization $203.53B Industry Shares Outstanding 7.46B Valuation Ratio Comparison Pfizer Average Trailing P/E 31.30 20.90 Dividend Yield 2.80% Forward P/E 16.40 20.23 3-Month Avg. Daily Trading Volume 28.65M Forward PEG 1.08 1.82 Percent Institutional Ownership 65% M/B 2.66 3.85 D/E 4.00 0.57 Book Value Per Share (mrq) $9.37 Valuation Estimates ROE(2004) 17% Actual Current Price (4/1/2005) $ 26.15 ROA(2004) 9% Est. 5 year EPS growth rate 12% Ratio Based Valuations Trailing P/E $ 39.08 Cost of Capital Estimations R Squared Beta Ke Forward P/E $ 37.84 Forward PEG $ 21.84 5-Year Regression 0.132 0.458 4.58% D/E $ 44.98 3-Year Regression 0.234 0.595 4.99% M/B $ 35.58 2-Year Regression 0.061 0.436 4.52% Ford Epic Valuation $ 62.16 Published 0.393 Intrinsic Valuations Kd 3.45% Discounted Dividends $ 35.58 WACC(bt) 4.07% Free Cash Flows $ 58.27 Residual Income $ 55.52 Abnormal Earnings Growth $ 55.52 Long-Run Residual Income Perpetuity $ 99.42 2
Page 1: Pfizer Equity Analysis and Valuatio
Page 5 and 6: Pfizer’s Industry Standing Pfizer
Page 7 and 8: market and side effects become appa
Page 9 and 10: As research and development costs c
Page 11 and 12: Classification of Industry Pfizer o
Page 13 and 14: With the threat of substitute produ
Page 15 and 16: acquired and liabilities assumed as
Page 17 and 18: Compensation of employees with the
Page 19 and 20: Pfizer has adopted a revenue recogn
Page 21 and 22: Net Sales /Accounts Receivable 5.15
Page 23 and 24: The net sales to cash from sales ra
Page 25 and 26: diagnostic ratios. Although these c
Page 27 and 28: e used, which says that the increas
Page 29 and 30: probably not reach the level it was
Page 31 and 32: Accounts Recievable Turnover 9.00 8
Page 33 and 34: Gross Profit Margin 100% 90% 80% 70
Page 35 and 36: Return on Assets 30% 25% 20% 15% 10
Page 37 and 38: Debt Service Margin 14.00 12.00 10.
Page 39 and 40: margin. Pfizer’s growth profit ma
Page 41 and 42: estimated at 4.38%. These percentag
Page 43 and 44: different discount rates. Once each
Page 45 and 46: This model uses beginning equity pe
Page 47 and 48: substituted into the formula the mo
Page 49 and 50: Conclusions After analyzing the res
Page 51 and 52: Moore, M. Chapter 7 - Prospective A
Page 53 and 54:
Total Accruals/Change in Sales 2003
Page 55 and 56:
Pfizer 20% 34% 36% 7% 27% Abbot 30%
Page 57 and 58:
Appendix D: Forecasted Financial St
Page 59 and 60:
Balance Sheet Actuals(Millions) For
Page 61 and 62:
Statement of Cash Flows Actuals(Mil
Page 63 and 64:
Appendix E: Cost of Debt Estimation
Page 65 and 66:
Three Year: SUMMARY OUTPUT (2002-20
Page 67 and 68:
Discounted Free Cash Flows: Pfizer
Page 69 and 70:
Discounted Abnormal Earnings Growth
Page 71 and 72:
Appendix H: Method of Comparables:
Page 73:
P/S PFIZER 4.1 ABBOTT LABS 3.63 BRI
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Pfizer Equity Analysis & Valuation

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