Intrinsic value of Pfizer - PFE

Previous Close

$36.21

  Intrinsic Value

$28.44

stock screener

  Rating & Target

sell

-21%

Previous close

$36.21

 
Intrinsic value

$28.44

 
Up/down potential

-21%

 
Rating

sell

We calculate the intrinsic value of PFE stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 215.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  8.13
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  52,824
  53,880
  55,120
  56,536
  58,127
  59,889
  61,822
  63,928
  66,207
  68,662
  71,297
  74,117
  77,125
  80,327
  83,731
  87,343
  91,171
  95,222
  99,507
  104,034
  108,815
  113,858
  119,178
  124,784
  130,692
  136,914
  143,464
  150,360
  157,615
  165,249
  173,278
Variable operating expenses, $m
 
  42,403
  43,253
  44,224
  45,315
  46,524
  47,850
  49,295
  50,858
  52,542
  54,350
  50,838
  52,902
  55,098
  57,433
  59,911
  62,536
  65,315
  68,254
  71,360
  74,638
  78,098
  81,747
  85,593
  89,645
  93,912
  98,406
  103,135
  108,112
  113,348
  118,855
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  43,820
  42,403
  43,253
  44,224
  45,315
  46,524
  47,850
  49,295
  50,858
  52,542
  54,350
  50,838
  52,902
  55,098
  57,433
  59,911
  62,536
  65,315
  68,254
  71,360
  74,638
  78,098
  81,747
  85,593
  89,645
  93,912
  98,406
  103,135
  108,112
  113,348
  118,855
Operating income, $m
  9,004
  11,478
  11,867
  12,312
  12,811
  13,365
  13,972
  14,633
  15,349
  16,120
  16,948
  23,278
  24,223
  25,229
  26,298
  27,432
  28,635
  29,907
  31,253
  32,675
  34,176
  35,760
  37,431
  39,192
  41,047
  43,001
  45,059
  47,224
  49,503
  51,901
  54,422
EBITDA, $m
  14,761
  20,097
  20,559
  21,087
  21,681
  22,338
  23,059
  23,844
  24,694
  25,610
  26,593
  27,645
  28,767
  29,961
  31,231
  32,578
  34,006
  35,517
  37,115
  38,804
  40,587
  42,468
  44,452
  46,543
  48,746
  51,067
  53,511
  56,082
  58,789
  61,636
  64,630
Interest expense (income), $m
  1,451
  1,130
  1,196
  1,282
  1,380
  1,489
  1,611
  1,744
  1,889
  2,047
  2,216
  2,398
  2,592
  2,799
  3,020
  3,255
  3,504
  3,768
  4,048
  4,343
  4,655
  4,985
  5,333
  5,700
  6,086
  6,494
  6,923
  7,375
  7,850
  8,350
  8,877
Earnings before tax, $m
  8,351
  10,347
  10,670
  11,030
  11,432
  11,876
  12,361
  12,889
  13,460
  14,074
  14,732
  20,881
  21,631
  22,429
  23,278
  24,177
  25,130
  26,139
  27,205
  28,332
  29,521
  30,775
  32,098
  33,492
  34,961
  36,508
  38,136
  39,850
  41,653
  43,550
  45,545
Tax expense, $m
  1,123
  2,794
  2,881
  2,978
  3,087
  3,206
  3,338
  3,480
  3,634
  3,800
  3,978
  5,638
  5,840
  6,056
  6,285
  6,528
  6,785
  7,058
  7,345
  7,650
  7,971
  8,309
  8,666
  9,043
  9,439
  9,857
  10,297
  10,759
  11,246
  11,759
  12,297
Net income, $m
  7,214
  7,554
  7,789
  8,052
  8,345
  8,669
  9,024
  9,409
  9,826
  10,274
  10,754
  15,243
  15,791
  16,374
  16,993
  17,649
  18,345
  19,081
  19,860
  20,682
  21,550
  22,466
  23,432
  24,449
  25,521
  26,651
  27,839
  29,090
  30,407
  31,792
  33,248

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  17,850
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  171,615
  156,629
  160,232
  164,350
  168,973
  174,096
  179,716
  185,837
  192,462
  199,600
  207,260
  215,455
  224,199
  233,510
  243,405
  253,904
  265,031
  276,809
  289,265
  302,426
  316,321
  330,984
  346,446
  362,745
  379,918
  398,005
  417,048
  437,092
  458,184
  480,374
  503,714
Adjusted assets (=assets-cash), $m
  153,765
  156,629
  160,232
  164,350
  168,973
  174,096
  179,716
  185,837
  192,462
  199,600
  207,260
  215,455
  224,199
  233,510
  243,405
  253,904
  265,031
  276,809
  289,265
  302,426
  316,321
  330,984
  346,446
  362,745
  379,918
  398,005
  417,048
  437,092
  458,184
  480,374
  503,714
Revenue / Adjusted assets
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
Average production assets, $m
  60,044
  61,262
  62,671
  64,282
  66,090
  68,094
  70,292
  72,686
  75,277
  78,069
  81,065
  84,270
  87,691
  91,332
  95,202
  99,309
  103,661
  108,268
  113,140
  118,287
  123,722
  129,457
  135,505
  141,880
  148,597
  155,671
  163,119
  170,959
  179,209
  187,888
  197,017
Working capital, $m
  7,834
  700
  717
  735
  756
  779
  804
  831
  861
  893
  927
  964
  1,003
  1,044
  1,089
  1,135
  1,185
  1,238
  1,294
  1,352
  1,415
  1,480
  1,549
  1,622
  1,699
  1,780
  1,865
  1,955
  2,049
  2,148
  2,253
Total debt, $m
  42,086
  33,234
  35,608
  38,321
  41,368
  44,744
  48,448
  52,482
  56,848
  61,551
  66,599
  72,000
  77,762
  83,898
  90,419
  97,338
  104,671
  112,432
  120,641
  129,314
  138,471
  148,133
  158,323
  169,064
  180,381
  192,300
  204,850
  218,059
  231,958
  246,581
  261,962
Total liabilities, $m
  112,071
  103,219
  105,593
  108,306
  111,353
  114,729
  118,433
  122,467
  126,833
  131,536
  136,584
  141,985
  147,747
  153,883
  160,404
  167,323
  174,656
  182,417
  190,626
  199,299
  208,456
  218,118
  228,308
  239,049
  250,366
  262,285
  274,835
  288,044
  301,943
  316,566
  331,947
Total equity, $m
  59,544
  53,411
  54,639
  56,043
  57,620
  59,367
  61,283
  63,370
  65,630
  68,064
  70,676
  73,470
  76,452
  79,627
  83,001
  86,581
  90,376
  94,392
  98,639
  103,127
  107,866
  112,865
  118,138
  123,696
  129,552
  135,720
  142,213
  149,048
  156,241
  163,807
  171,766
Total liabilities and equity, $m
  171,615
  156,630
  160,232
  164,349
  168,973
  174,096
  179,716
  185,837
  192,463
  199,600
  207,260
  215,455
  224,199
  233,510
  243,405
  253,904
  265,032
  276,809
  289,265
  302,426
  316,322
  330,983
  346,446
  362,745
  379,918
  398,005
  417,048
  437,092
  458,184
  480,373
  503,713
Debt-to-equity ratio
  0.707
  0.620
  0.650
  0.680
  0.720
  0.750
  0.790
  0.830
  0.870
  0.900
  0.940
  0.980
  1.020
  1.050
  1.090
  1.120
  1.160
  1.190
  1.220
  1.250
  1.280
  1.310
  1.340
  1.370
  1.390
  1.420
  1.440
  1.460
  1.480
  1.510
  1.530
Adjusted equity ratio
  0.313
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  7,214
  7,554
  7,789
  8,052
  8,345
  8,669
  9,024
  9,409
  9,826
  10,274
  10,754
  15,243
  15,791
  16,374
  16,993
  17,649
  18,345
  19,081
  19,860
  20,682
  21,550
  22,466
  23,432
  24,449
  25,521
  26,651
  27,839
  29,090
  30,407
  31,792
  33,248
Depreciation, amort., depletion, $m
  5,757
  8,619
  8,692
  8,776
  8,869
  8,973
  9,087
  9,211
  9,345
  9,490
  9,645
  4,366
  4,544
  4,732
  4,933
  5,146
  5,371
  5,610
  5,862
  6,129
  6,410
  6,708
  7,021
  7,351
  7,699
  8,066
  8,452
  8,858
  9,285
  9,735
  10,208
Funds from operations, $m
  15,274
  16,173
  16,482
  16,827
  17,214
  17,642
  18,111
  18,620
  19,171
  19,764
  20,400
  19,609
  20,334
  21,106
  21,925
  22,795
  23,716
  24,691
  25,722
  26,811
  27,961
  29,174
  30,453
  31,801
  33,221
  34,716
  36,291
  37,948
  39,692
  41,527
  43,456
Change in working capital, $m
  -627
  14
  16
  18
  21
  23
  25
  27
  30
  32
  34
  37
  39
  42
  44
  47
  50
  53
  56
  59
  62
  66
  69
  73
  77
  81
  85
  90
  94
  99
  104
Cash from operations, $m
  15,901
  16,159
  16,465
  16,809
  17,194
  17,619
  18,086
  18,593
  19,141
  19,732
  20,365
  19,573
  20,295
  21,064
  21,881
  22,748
  23,666
  24,639
  25,666
  26,752
  27,899
  29,108
  30,383
  31,728
  33,144
  34,636
  36,206
  37,859
  39,598
  41,427
  43,352
Maintenance CAPEX, $m
  0
  -3,111
  -3,174
  -3,247
  -3,331
  -3,424
  -3,528
  -3,642
  -3,766
  -3,900
  -4,045
  -4,200
  -4,366
  -4,544
  -4,732
  -4,933
  -5,146
  -5,371
  -5,610
  -5,862
  -6,129
  -6,410
  -6,708
  -7,021
  -7,351
  -7,699
  -8,066
  -8,452
  -8,858
  -9,285
  -9,735
New CAPEX, $m
  -1,999
  -1,218
  -1,409
  -1,611
  -1,808
  -2,004
  -2,198
  -2,394
  -2,591
  -2,792
  -2,996
  -3,205
  -3,420
  -3,642
  -3,870
  -4,107
  -4,352
  -4,607
  -4,872
  -5,148
  -5,435
  -5,735
  -6,048
  -6,375
  -6,717
  -7,074
  -7,448
  -7,840
  -8,250
  -8,679
  -9,129
Cash from investing activities, $m
  -7,811
  -4,329
  -4,583
  -4,858
  -5,139
  -5,428
  -5,726
  -6,036
  -6,357
  -6,692
  -7,041
  -7,405
  -7,786
  -8,186
  -8,602
  -9,040
  -9,498
  -9,978
  -10,482
  -11,010
  -11,564
  -12,145
  -12,756
  -13,396
  -14,068
  -14,773
  -15,514
  -16,292
  -17,108
  -17,964
  -18,864
Free cash flow, $m
  8,090
  11,830
  11,882
  11,951
  12,055
  12,191
  12,359
  12,557
  12,784
  13,040
  13,324
  12,167
  12,509
  12,879
  13,279
  13,709
  14,169
  14,661
  15,185
  15,742
  16,335
  16,963
  17,628
  18,332
  19,076
  19,862
  20,692
  21,567
  22,490
  23,463
  24,488
Issuance/(repayment) of debt, $m
  2,573
  1,836
  2,374
  2,714
  3,047
  3,376
  3,704
  4,033
  4,366
  4,704
  5,048
  5,400
  5,763
  6,136
  6,521
  6,919
  7,333
  7,762
  8,208
  8,673
  9,157
  9,662
  10,190
  10,741
  11,317
  11,919
  12,549
  13,209
  13,900
  14,623
  15,381
Issuance/(repurchase) of shares, $m
  -3,981
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1,604
  1,836
  2,374
  2,714
  3,047
  3,376
  3,704
  4,033
  4,366
  4,704
  5,048
  5,400
  5,763
  6,136
  6,521
  6,919
  7,333
  7,762
  8,208
  8,673
  9,157
  9,662
  10,190
  10,741
  11,317
  11,919
  12,549
  13,209
  13,900
  14,623
  15,381
Total cash flow (excl. dividends), $m
  6,271
  13,665
  14,256
  14,665
  15,101
  15,567
  16,063
  16,590
  17,150
  17,743
  18,372
  17,568
  18,271
  19,015
  19,800
  20,628
  21,502
  22,423
  23,393
  24,415
  25,492
  26,625
  27,818
  29,073
  30,393
  31,781
  33,241
  34,776
  36,390
  38,086
  39,869
Retained Cash Flow (-), $m
  5,176
  -1,029
  -1,228
  -1,404
  -1,576
  -1,747
  -1,917
  -2,087
  -2,259
  -2,434
  -2,612
  -2,794
  -2,982
  -3,175
  -3,374
  -3,580
  -3,794
  -4,016
  -4,247
  -4,488
  -4,738
  -5,000
  -5,273
  -5,558
  -5,856
  -6,168
  -6,494
  -6,835
  -7,192
  -7,567
  -7,959
Prev. year cash balance distribution, $m
 
  7,162
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  19,799
  13,028
  13,261
  13,525
  13,820
  14,146
  14,503
  14,891
  15,310
  15,760
  14,773
  15,289
  15,840
  16,425
  17,047
  17,707
  18,406
  19,146
  19,928
  20,753
  21,625
  22,545
  23,515
  24,537
  25,614
  26,747
  27,941
  29,197
  30,519
  31,910
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  18,983
  11,927
  11,540
  11,136
  10,712
  10,267
  9,798
  9,307
  8,795
  8,262
  7,015
  6,524
  6,023
  5,514
  5,005
  4,500
  4,005
  3,526
  3,068
  2,637
  2,237
  1,871
  1,541
  1,250
  996
  780
  600
  452
  333
  240
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Pfizer Inc. (Pfizer) is a research-based global biopharmaceutical company. The Company is engaged in the discovery, development and manufacture of healthcare products. Its global portfolio includes medicines and vaccines, as well as consumer healthcare products. The Company manages its commercial operations through two business segments: Pfizer Innovative Health (IH) and Pfizer Essential Health (EH). IH focuses on developing and commercializing medicines and vaccines, as well as products for consumer healthcare. IH therapeutic areas include internal medicine, vaccines, oncology, inflammation and immunology, rare diseases and consumer healthcare. EH includes legacy brands, branded generics, generic sterile injectable products, biosimilars and infusion systems. EH also includes a research and development (R&D) organization, as well as its contract manufacturing business. Its brands include Prevnar 13, Xeljanz, Eliquis, Lipitor, Celebrex, Pristiq and Viagra.

FINANCIAL RATIOS  of  Pfizer (PFE)

Valuation Ratios
P/E Ratio 30.5
Price to Sales 4.2
Price to Book 3.7
Price to Tangible Book
Price to Cash Flow 13.8
Price to Free Cash Flow 15.8
Growth Rates
Sales Growth Rate 8.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 33.6%
Cap. Spend. - 3 Yr. Gr. Rate 6.4%
Financial Strength
Quick Ratio 2
Current Ratio 0.2
LT Debt to Equity 52.7%
Total Debt to Equity 70.7%
Interest Coverage 7
Management Effectiveness
Return On Assets 5%
Ret/ On Assets - 3 Yr. Avg. 5.3%
Return On Total Capital 7%
Ret/ On T. Cap. - 3 Yr. Avg. 7.3%
Return On Equity 11.6%
Return On Equity - 3 Yr. Avg. 11.4%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 76.7%
Gross Margin - 3 Yr. Avg. 79.3%
EBITDA Margin 29.5%
EBITDA Margin - 3 Yr. Avg. 33.3%
Operating Margin 17%
Oper. Margin - 3 Yr. Avg. 21.3%
Pre-Tax Margin 15.8%
Pre-Tax Margin - 3 Yr. Avg. 19.6%
Net Profit Margin 13.7%
Net Profit Margin - 3 Yr. Avg. 15.4%
Effective Tax Rate 13.4%
Eff/ Tax Rate - 3 Yr. Avg. 20.4%
Payout Ratio 101.4%

PFE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PFE stock intrinsic value calculation we used $52824 million for the last fiscal year's total revenue generated by Pfizer. The default revenue input number comes from 2016 income statement of Pfizer. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our PFE stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for PFE is calculated based on our internal credit rating of Pfizer, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Pfizer.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of PFE stock the variable cost ratio is equal to 78.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for PFE stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.6% for Pfizer.

Corporate tax rate of 27% is the nominal tax rate for Pfizer. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the PFE stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for PFE are equal to 113.7%.

Life of production assets of 19.3 years is the average useful life of capital assets used in Pfizer operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for PFE is equal to 1.3%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $59544 million for Pfizer - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 5955.24 million for Pfizer is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Pfizer at the current share price and the inputted number of shares is $215.6 billion.

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Financial statements of PFE
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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