Intrinsic and Relative Valuation of Pfizer Inc.
Abstract
The aim of the thesis was to estimate the intrinsic and relative value of Pfizer Inc. byanalysing both: Pfizer and the pharmaceutical industry. To create a multitude of valuationestimates the following valuation methods were utilized: Discounted Cash Flow (DCF)analysis, Comparable Company Analysis (CCA), and the Precedent Transaction Analysis(PTA). This allowed for several estimates both for intrinsic and relative value, furtherchoosing one valuation to be representative of the overall thesis.
The intrinsic valuations (DCF) returned estimated values per share ranging from roughly $75-100 and the relative valuations (CCA & PTA) returned estimated values per share rangingfrom roughly $58-158. The broad range of estimated values are representative of the 3different valuation methods utilized. The relative valuations yielded the highest, mostdispersed estimated values per share, as they were based upon current and prior marketconditions for the pharmaceutical sector. The relative valuations were further skewed due tothe current market conditions, as a result of the pandemic. The intrinsic valuations yieldedmore concise values per share, due to the lesser changes from the models applied.
The representative valuation for the thesis is the intrinsic valuation of $88.71. This estimatedvalue per share was calculated utilizing the DCF-analysis with projected cash flows reflectiveof the demand for Pfizer’s COVID-19 portfolio and IQVIA’s growth estimate regarding thefuture growth for the pharmaceutical industry. Overall, this intrinsic valuation is greater thanthe current market price of $40.12 (8th March 2023), further indicating that the share price forPfizer Inc. is undervalued by the market.