What Is The Real Value Of Pfizer Inc (PFE) Using A Simple DCF

As part of a new series, each week we’re going to conduct a DCF on one of the companies in our screens. This week the stock is Pfizer Inc (PFE). We currently have the stock on an Acquirers Multiple of 6.60. The stock is currently priced at $35.64.

Profile

Pfizer is one of the world’s largest pharmaceutical firms, with annual sales close to $50 billion (excluding COVID-19 product sales). While it historically sold many types of healthcare products and chemicals, now, prescription drugs and vaccines account for the majority of sales. Top sellers include pneumococcal vaccine Prevnar 13, cancer drug Ibrance, cardiovascular treatment Eliquis, and immunology drug Xeljanz. Pfizer sells these products globally, with international sales representing close to 50% of its total sales. Within international sales, emerging markets are a major contributor.

Inputs

Discount Rate: 8%

Terminal Growth Rate: 2%

Forecasted Free Cash Flows (FCFs):

Year	FCF
2023	$20.2 billion
2024	$22.4 billion
2025	$24.8 billion
2026	$27.3 billion
2027	$29.9 billion

Terminal Value

Terminal Value = FCF * (1 + g) / (r – g) = $508.3billion

Present Value of Terminal Value

PV of Terminal Value = Terminal Value / (1 + WACC)^5) = 345.94 billion

Present Value of Free Cash Flows

Present Value of FCFs = ∑ (FCF / (1 + r)^n) = $98 billion

Enterprise Value

Enterprise Value = Present Value of FCFs + Present Value of Terminal Value = 443.95 billion

Net Debt

Net Debt = Total Debt – Total Cash = 34.45 billion

Equity Value

Equity Value = Enterprise Value – Net Debt = 409.50 billion

Per-Share DCF Value

Per-Share DCF Value = Enterprise Value / Number of Shares Outstanding = $72.54 per share

Conclusion

DCF Value	$72.54
Current Price	$35.64
Margin of Safety	50.87%

Based on the DCF valuation, Pfizer is currently undervalued. The DCF value of $72.54 per share is higher than the current market price of $35.64 which indicates that the stock is undervalued. Margin of Safety is 50.87%.

It’s important to note that this valuation is based on the assumptions and inputs provided, and it’s always recommended to consider multiple valuation methods and conduct further analysis before making investment decisions.