DCF Studio

    PFE · NYQ · Healthcare

    Pfizer Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 11.06

    Market price

    USD 27.66

    Implied upside

    -60.0%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedReported capital expenditure averages 4.63% of revenue against depreciation and amortisation of 9.28%. A business cannot depreciate more than it invests indefinitely. Capex has been set to 9.28% of revenue so the forecast is not handed free growth. The accounts do not separate depreciation from amortisation, so the combined charge is used - if a large part of it is amortisation of an acquisition, the reported capex is probably right and this substitution is not. Override it if the reported figure is right.

    Value Per Share

    Perpetuity growth
    USD 11.06-60.0%
    Exit multiple
    USD 8.00-71.1%
    Market price
    USD 27.66

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn6bn11bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 53.3bnUSD 45.4bnUSD 38.7bnUSD 33.0bnUSD 28.1bn-14.8%
    EBITUSD 12.8bnUSD 10.9bnUSD 9.3bnUSD 7.9bnUSD 6.8bn-14.8%
    NOPATUSD 11.6bnUSD 9.9bnUSD 8.4bnUSD 7.2bnUSD 6.1bn-14.8%
    Add depreciation & amortisationUSD 4.9bnUSD 4.2bnUSD 3.6bnUSD 3.1bnUSD 2.6bn-14.8%
    Less capital expenditureUSD -4.9bnUSD -4.2bnUSD -3.6bnUSD -3.1bnUSD -2.6bn-14.8%
    Less increase in working capitalUSD -483.2mUSD -411.7mUSD -350.8mUSD -298.9mUSD -254.7m-14.8%
    Free cashflow to firmUSD 11.1bnUSD 9.5bnUSD 8.1bnUSD 6.9bnUSD 5.9bn-14.8%
    Discount factor0.96700.90430.84570.79080.7395-
    Present valueUSD 10.8bnUSD 8.6bnUSD 6.8bnUSD 5.4bnUSD 4.3bn-20.3%
    Present Value Of The ForecastUSD 36.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.530Reported 0.299, pulled toward 1.0 (Blume)
    Cost of equity7.91%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 157.7bn71.1% of capital
    Total debtUSD 64.0bn28.9% of capital, book value as a proxy
    Tax rate9.6%Effective, capped at statutory
    WACC6.93%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 11.06

    68% of EV

    Forecast FCFF, final year
    USD 5.9bn
    Capex at depreciation, working capital in reinvestment
    USD 6.1bn
    Less reinvestment at g/ROIC (25.8% of NOPAT)
    USD -1.6bn
    Capitalised
    USD 4.5bn
    ROIC (reported)
    9.7%
    Terminal value, undiscounted
    USD 104.9bn
    Terminal value, discounted
    USD 77.6bn
    Enterprise value
    USD 113.6bn
    Less net debt
    USD 50.4bn
    Equity value
    USD 63.2bn

    Exit at 8.7x EBITDA

    Value per shareUSD 8.00

    63% of EV

    Terminal value, undiscounted
    USD 81.3bn
    Terminal value, discounted
    USD 60.1bn
    Enterprise value
    USD 96.1bn
    Less net debt
    USD 50.4bn
    Equity value
    USD 45.7bn

    Spread between methods: 32%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.93%19.2721.5224.6729.4237.46
    5.93%13.5914.6015.9017.6220.04
    6.93%9.9910.4711.0611.7912.72
    7.93%7.497.727.998.318.68
    8.93%5.665.755.865.986.11

    Outlined: this model. Green text: above today's price of 27.66. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year-14.8%-2.2%+12.6pp
    EBIT margin24.1%43.9%+19.8pp
    Discount rate6.9%4.7%-2.2pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.