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I keep seeing Pfizer show up on cheap-stock screens and I've half-talked myself into buying it more than once.
So I finally sat down and ran it through three different value frameworks to figure out if it's an actual bargain or a trap — Ben Graham's old defensive checklist, a Buffett-style quality screen, and Phil Town's Rule #1.
*(Quick note in case Rule #1 is new to you — it's from Phil Town's book of the same name. The idea is to only buy a great company when it's trading well below what it's worth, and to judge "great" by whether stuff like earnings, sales and return on capital have all been growing \~10%+ a year. The name's a nod to Buffett's "rule #1: don't lose money.")*
They could not have disagreed more. Stock's around $26 right now and here's what each one spit out:
\- Graham: worth \~$29, basically a buy
\- Buffett-style: worth \~$11, hard avoid
\- Rule #1: "sticker price" of \~$3, screaming sell
Same company, same day, and the fair value swings from $3 to $29. So I went digging into why, and honestly it changed how I look at these screens in general.
The thing breaking all three is COVID. Revenue went $81B in 2021 → $101B in 2022 (the vaccine + Paxlovid peak) → back down to \~$64B by 2024. EPS is the wild one: $5.47 in 2022, then $0.37 in 2023, then $1.41 last year. ROIC fell from 22% to about 8%.
Graham likes it because his P/E test runs off a 3-year average EPS — which still has that monster 2022 baked in. On the smoothed number the P/E is \~10.7, it's trading about 11% under his "Graham number," and they've paid a dividend 12 years straight. By his rules that's a buy, no question.
The Buffett screen hates it for two specific reasons: long-term debt is 8x earnings (he wants under 4x), and if you look at the actual \*trend\* in earnings over the last 11 years it's shrinking around 7% a year. Wonderful businesses compound — this one's going backwards while carrying a lot of debt. Owner-earnings value lands near $11.
Rule #1 is the harsh one. It basically takes the recent (now negative) growth and projects it forward, so the sticker price falls apart to \~$3 and it flags a sell.
What clicked for me is that all three are really arguing about the same thing: what do you do with one freak year?
Graham averages it away, Buffett looks at the direction it's heading, Rule #1 assumes the recent trend keeps going. None of them are flat-out wrong, they just handle a distorted earnings history differently — and Pfizer's history is about as distorted as it gets.
For what it's worth I don't own it and I'm not sure I'd pull the trigger. The bull case is real (2024 might be the bottom, the Seagen oncology pipeline, earnings normalizing back toward $2.50–3).
But a dividend yielding north of 6% sitting on shrinking earnings, with a wall of patent expirations coming, is pretty much what a value trap looks like from the inside.
So I'll throw it to you all — is the smoothed-earnings "it's cheap" read the sober one here, or is this a falling knife that just happens to pay a fat yield?