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Pfizer Inc. - Good Buy In Pharmaceutical Term Paper

Pfizer Inc. - Good Buy in Pharmaceutical Stock? Pfizer Inc., is a giant in the Pharmaceutical Sector. It is traded on the New York Stock Exchange under ticker symbol PFE. Its principle activities include the research and manufacturing of prescription medicines for human and veterinary applications on a global scale. Their products carry such familiar names as Zoloft, Lipitor, Norvasc, Zithromax, Zyrtec, and the household name, Viagra. They also have a line of consumer products such as confectionery products, shaving products, and tetra fish products (www.bigcharts.com,2003). Pharmaceuticals account for the largest portion of their revenues, averaging 84%, while consumer products make up the remainder of their income stream.

Pfizer stock has been on a downtrend since mid year 2001. This came after a boom in the biotechnology sector, a sector closely related to the pharmaceutical sector. The key question that an investor must answer is whether this means that Pfizer is a good buy at such a low price, or is it better left alone for fear that it will fall further. The only real way to answer this question is to look at their overall financial health, compare these ratios to the averages for the sector in which it operates, and finally to the market as a whole. This report will examine these factors in order to determine the best action for an investor considering Pfizer, Inc.

First, let us examine the profitability ratios. For the past year, Pfizer's gross margin, operating margin and...

Pfizer's gross margin was up 85.24% as compared to the same period last year (Pfizer, Inc., 2003b). Operating margin and profit margin have grown 35.67% and 30.60% respectively (Pfizer, Inc., 2003b). Management effectiveness has shown considerable health as well. Pfizer managed to receive a 52.13% Return on Equity from the period December 2001-2002 (Pfizer, Inc., 2003b). They receive a 24.43% Return on their assets (Pfizer, Inc., 2003b). These numbers reflect that a shareholder is getting a good value for their investment. Management has shown the ability to realize a considerable return on shareholder's investments. In addition, Pfizer investors receive a dividend yield that has been on the rise since 1999 and is currently averaging 0.60 per share over the year (Pfizer, Inc., 2003a).
Pfizer Inc. relies on operating capital and short-term borrowing to meet its needs. An examination of Annual Reports from 1997 to 2002 reveals that they consistently have sufficient capital to meet their obligations. They have an outstanding credit rating with the banking institutions with which they do business (Pfizer, Inc., 2003a). Pfizer has consistently kept sufficient cash balance on hand to meet its needs.

The price/earning ratio over the past five years has been erratic. This ratio has been effected by several factors. First, Pfizer Inc. merged with Warner-Lambert (Pfizer, Inc., 2003a). There were many costs associated with this merger, but as expected…

Sources used in this document:
References

Bigcharts.com. (2003) Profile. Http://www.bigcharts.com. Accessed February 14, 2003.

Pfizer, Inc. (2003a) For Investors. http://www.pfizer.com/are/mn_investors.cfm Accessed February 14, 2003.

Pfizer, Inc. (2003b) For Investors. SEC Filings. http://www.pfizer.com/are/mn_investors_sec.cfm Accessed February 14, 2003.
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