Performance
There’s good news and bad news for Pfizer Inc. (NYSE:PFE) when it comes to performance so far this year. First, the good news. The stock is up by 15%. The bad news, though, is that the last half of April and the month of May thus far haven’t helped.
Pfizer outpaced the S&P 500 index throughout much of the year. However, with the broader markets continuing to increase during May and Pfizer stock languishing somewhat, the S&P now beats out the pharmaceutical company.
The situation looks even less favorable when we compare Pfizer against the health-care industry. Using the SPDR Health Care Select ETF as a proxy, Pfizer Inc. (NYSE:PFE) significantly trails other stocks in the industry.
Pfizer makes up the second-highest holding in the ETF. More than 11% of the SPDR Health Care Select ETF is in Pfizer stock, while Johnson & Johnson (NYSE:JNJ) makes up 13%.
Valuation
While Pfizer stock might not have outperformed the S&P 500 index or the health-care industry, its valuation appears to be quite attractive. The trailing price-to-earnings ratio for Pfizer Inc. (NYSE:PFE) currently stands below 14. Pfizer’s forward multiple of a little over 12 looks even better.
There is one important thing to note with Pfizer’s trailing P/E, though. The company recorded $4.8 million in net income during the fourth quarter of 2012 due to the sale of its nutrition business to Nestle. This one-time amount inflated earnings and therefore lowered the trailing P/E.
Pfizer also compares well against several of its peers. Johnson & Johnson (NYSE:JNJ) claims a trailing P/E of nearly 24 and a forward multiple of over 15, both steeper valuations than Pfizer. Novartis AG (ADR) (NYSE:NVS) comes in relatively closely behind Pfizer Inc. (NYSE:PFE) in market cap, but still looks somewhat pricier with a trailing P/E of almost 19 and a forward P/E of below 14.
Merck & Co., Inc. (NYSE:MRK) is more expensive on a trailing basis. However, the drugmaker comes in lower than Pfizer in valuation on one key measure. Merck & Co., Inc. (NYSE:MRK)’s forward P/E multiple of slightly below 12 stands a little cheaper than Pfizer’s forward multiple.
The persistent problem with comparing different pharmaceutical companies’ valuations, though, is that their business models and product mix often are quite different despite some similarities. For example, J&J operates a much larger consumer products group than Pfizer does. Novartis AG (ADR) (NYSE:NVS)’ business units include Alcon, which focuses on vision care products — an area for which Pfizer has no equivalent. Likewise, Merck boasts significant revenue from vaccines; Pfizer Inc. (NYSE:PFE) has none.
J&J sold its animal health unit a couple of years ago. Merck & Co., Inc. (NYSE:MRK) and Novartis AG (ADR) (NYSE:NVS) still retain their animal health units, but Pfizer spun off its animal health business into Zoetis Inc (NYSE:ZTS) earlier this year. Pfizer still maintains 80% ownership of Zoetis, however.
