Posts Tagged ‘PFE’

  • Pfizer Files for Animal Health Spin-Off
    , August 13th, 2012 at 12:44 pm

    I often tell investors that I’m not a big fan of most IPOs. There’s an implicit assumption in any IPO that the issuer can get a good price for themselves, and that’s to the detriment of shareholders. The academic research shows that this is more often than not correct.

    I do like to pay attention when a company, especially a blue-chip company, has a yard sale. I take notice whenever I see a large company spin-off a smaller unit.

    Today’s news is that Pfizer will be spinning off its animal health unit. This unit isn’t exactly small either. Last year, it generated sales of $4.23 billion. The independent company will be called Zoetis.

    According to Bloomberg, current investors may be able “to swap a portion of their Pfizer shares for stock in the new company.”

    I can’t say if Zoetis is a buy just now (we still don’t know the price), but it will definitely be a stock worth watching.

  • World’s Simplest Stock Valuation Measure
    , May 10th, 2012 at 10:51 am

    Here’s the world simplest stock valuation measure:

    Growth Rate/2 + 8 = PE Ratio

    Let me emphasize that this is simply a quick-and-dirty valuation tool and it shouldn’t be used as a precise measure of a stock’s value. But when I’m first looking at a stock and want to see roughly how it’s priced, this is what I’ll use.

    For example, let’s look at Pfizer ($PFE). Wall Street expects the company to earn $2.34 per share next year. They also see the company’s 5-year growth rate at 2.79%. If we take half the growth rate and add 8, that gives us a fair value P/E Ratio of 9.40. Multiplying that by the $2.34 estimate gives us a fair price for Pfizer of $21.98. The current price for Pfizer is $22.98, so it’s about fairly priced.

    Let’s look at IBM ($IBM) which has a higher growth rate. Wall Street sees IBM earning $16.61 next year. They peg the five-year growth rate at 10.58%. Our formula gives us a fair value multiple of 13.29, and that multiplied by $16.61 works out to a value of $220.75. IBM is currently at $201.71.

    I like to find stocks that are going for more than 30% below our fair value. As I said, that’s just one tool I use to find bargain stocks.