Investment Analysis
Pfizer is an American international pharmaceutical company that is headquartered in New York. It is among the largest pharmaceutical companies on the globe. The operational activity of Pfizer is to produce drugs and vaccines to overcome disease including cardiology, immunology, neurology, and oncology. The core products of the company are Lyrica, Lipitor, Diflucan, and Zithromax. There are more than 78,300 employees working in different cities associated with the organization. It believes in merger and acquisition to spread the business all over the globe through fulfilling legal requirements and social responsibilities of business. Pfizer was found in 1849, but now it has spread its operational activities in different cities (“Pfizer Inc. (PFE)”).
Recent Events
Pfizer believes in the expansion so it organizes programs and provides funds to increase the credibility of business. The recent funding was provided to the earthquake victims in Pakistan who were unable to manage all the things by their own. The acquisition of Anacor Pharmaceuticals for $5.2 Billion is another step to increase the business of the company. Also, Pfizer also acquires small pharmaceutical companies to strengthen its position and increase market share. However, Pfizer also terminates the deal with the certain companies for acquisition after determining that it would not provide long-term benefits to the company. It terminated or canceled the deal with AstraZeneca and Allergan as they were predicted to be the failure in providing a potential return in the long run. There is a question in the mind of shareholders of the company that whether the CEO intends to shut down the company as the current cancellation and termination are indicating the fact.
Ratio Analysis using the information from Income Statement and Balance Sheet
Ratio analysis is used to identify the health of Pfizer and also to recommend the investor whether to take the decision to invest or to avoid investing in the stocks. The results show that the business is able to protect and stabilize the level of income, efficiency, and liquidity for three consecutive years (i.e. 2013-2015).
Source:
Weighted Average Cost of Capital from External Sources
The calculation of WACC is derived to identify the level of interest rate that Pfizer would think to offer for its dividends. The Weighted average cost of capital is also essential to develop effective and efficient investment decisions in the future.
The overall case provides the need to analyze two main investment opportunities available to an investor who is 25 years from his retirement. The analysis is undertaken for a total amount of $100,000 and the question is raised that whether the person must invest the money in a saving account in a stock of Pfizer. The analysis is undertaken with identifying and separating the two options available to the person, firstly not to invest in the stocks and secondly to invest partial amount (i.e. $100,000) in stocks of Pfizer.
Time Value of Money
The results show that the option two is beneficial for the investor since he is able to get more returns from the investment rather than placing the money in a saving account. The level of return is high but the risks are also higher in case of buying stock of a single company.
Calculation of Future Price using Historical Data
Works Cited
Brigham, Eugene and Michael Ehrhardt. Financial Management: Theory & Practice. Boston: Cengage Learning, 2007. Print.
Drake, Pamela Peterson and Frank J. Fabozzi. Foundations and Applications of the Time Value of Money. New York: John Wiley & Sons, 2009. Print.
Pfizer. Appendix A 2015 Financial Report. 2015. Web. 31 May 2016 <http://www.pfizer.com/system/files/presentation/2015_Pfizer_Financial_Report.pdf>.
Pfizer Inc. (PFE). 2016. Web. 31 May 2016 <http://finance.yahoo.com/q/pr?s=pfe>.
Tsang, Amie. Morning Agenda: Election Years Are Steeped in Markets’ Least Favorite Thing, Uncertainty. 2016 17-May. Web. 2016 31-May <http://news.blogs.nytimes.com/2016/05/17/morning-agenda-election-years-are-steeped-in-markets-least-favorite-thing-uncertainty/?_r=0>.
