I’ve never really been a fan of Pfizer Inc. I just never could get excited about its business compared to some of its peers in the drug manufacturing field.
However, anytime you can get a 4% yield on PFE stock you have to consider owning it.
Yes, it has underperformed both its drug manufacturing peers and the S&P 500 in almost any period over the last 15 years, but it’s possible that reversion to the mean will deliver above-average returns over the next 15 years.
Here’s what we do know about Pfizer.
It had $13.9 billion in free cash flow in fiscal 2016, a healthy 26.3% of its revenue. It currently trades at 12.5 times cash flow; by comparison, Novartis AG (ADR) (NVS), its next biggest peer by market cap, trades at 16.3 times cash flow.
Pfizer is cheap, maybe perpetually so, but eventually that free cash flow generation has got to create shareholder value.