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Pfizer's stock is down by about -12% compared to about -9% for Merck since early February. The current coronavirus crisis will likely impact pharmaceutical companies on two fronts, 1. supply chain disruptions, and 2. postponement of minor health related issues and surgeries. On the positive side, pharmaceutical companies are also busy developing a vaccine for COVID-19. Pfizer is working with BioNTech SE to co-develop and distribute a potential based coronavirus vaccine. Pharmaceutical companies usually are defensive plays in times of financial crisis, which explains the outperformance of these stocks vis-a-vis S&P 500, which has declined around 20% since early February. Below, we take a look at whether Pfizer could be a better bet compared to Merck by looking at its fundamental performance.
CORONAVIRUS CRISIS : Since early February Pfizer stock has moved -12.3% compared to -9.2% for the Merck & Co, Inc.Pfizer's stock has declined by about 12% since early February, compared to 9% for Merck, after the WHO declared a global health emergency relating to coronavirus.Pfizer's stock declined 7% while Merck's stock is down 6% since March 8th, as U.S. cases accelerated.
Pfizer% Change For Key Dates: 2020 Crisis
Merck & Co, Inc% Change For Key Dates: 2020 Crisis
HISTORICAL PERFORMANCE: From 2009-2019 Pfizer stock has grown at 0.8x the rate of the Merck & Co, Inc
Pfizer stock went from $12 at the end of 2009 to $39 at the end of 2019, representing a change of 211.5%.
During the same time period, the Merck & Co, Inc went from $26 to $90 representing a change of 252.8%.
This implies that Pfizer stock grew at 0.8x the rate of Merck & Co, Inc
PFE Stock Price
MRK Stock Price
PFE Stock Price Annualized Rate of Return
MRK Stock Price Annualized Rate of Return
ANALYSIS: Is Pfizer stock expensive based on a review of the fundamentals?
P/E Ratio: Based on trailing 2019 P/E ratios, PFE stock looks attractive compared to prior years and attractive compared to Merck & Co, Inc
Pfizer's current P/E multiple (based on 2019 results) stands at about 11x, compared to about 15x for Merck.
* P/E Ratio is calculated based on year end market price and trailing adjusted earnings. However, for 2020 P/E, we use 2019 adjusted earnings and current market price.
Historical Revenue Growth: Merck's revenue grew at a faster pace compared to Pfizer
Pfizer 2014-19 annualized revenue growth of 1% is 0.4x that of the 2014-19 Merck's annualized revenue growth rate of 2.1%.
2014-19 Annualized Revenue Growth Comparison
PFE Annual Change in Revenue
MRK Annual Change In Revenue
Historical EPS Growth: Merck's EPS growth was higher than Pfizer's between 2014 and 2019.
Pfizer's 2014-19 annualized adjusted EPS growth of 4.5% is 0.7x that of the 2014-19 annualized adjusted EPS growth rate of 6.8% for Merck.
2014-19 Annualized EPS Growth Comparison
PFE Adjusted EPS Growth
MRK Adjusted EPS Growth
Survival Check: Total Debt Comparisons
PFE Total Debt
MRK Total Debt
Merck has posted higher revenue growth compared to Pfizer over the last 6 years. Both the companies' stocks have been more resilient through the crisis, thus far, and Merck could see a larger upside if the health crisis abates, considering its EPS growth has been much higher than Pfizer. Also, Merck is less leveraged compared to Pfizer. In terms of cash flows, both the companies have enough cash from operations to cover for their interest expenses. Moreover, Merck's P/E ratio is lower compared to its own historical P/E ratio, though it is slightly higher than that of Pfizer. Merck's blockbuster drug, Keytruda, will likely continue to gain market share and aid the company's near term growth.
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Pfizer - PFE