Fast Tracking for Ideas
Pfizer (PFE) is the world’s largest pharmaceutical company with such well-known products as Lipitor, Celebrex and Aricept. The stock has fallen into the rubble pile as the price dropped precipitously from $39 in February 2004 to $21 currently, reflecting patent expirations, including Lipitor’s in 2010, and flat sales last year.
Fast Track results: The stock failed 3 categories. Pfizer is a classic contrarian idea, and is worth a closer look.
Key Points:
- Pfizer has a fortress balance sheet. The company is cash rich with $25.5 billion of cash and short-term investments on the balance sheet at year-end 2007. Long-term debt as a percentage of total capital is a low 10.1%.
- Pfizer generated operating cash flow of $13.4 billion in 2007 and, after capital expenditures, free cash flow of $11.5 billion. Management is forecasting operating cash flow to rise to $17-$18 billion this year.
- The Street on balance is not interested in the stock, with 13 hold and 2 underperform ratings out of a total of 23 analysts.
- The stock offers a hefty 6% yield. As an expression of confidence in the future of the business, management raised the dividend 10% in this year’s first quarter.
The Company Stock Risk Profile Fast Track is a research tool for quickly and easily screening stocks for potential ideas. Fast Track is comprised of 10 key categories incorporating fundamentals, valuation and how management and the Street feel about the stock. I like to see a stock fail no more than 3 categories before putting the stock through the complete 50-category Company Stock Risk Profile research process. Most important, whatever screening tool you choose to use, always thoroughly research the stocks that pass your screen before buying.
