Pfizer vs. AstraZeneca: Which Drug Manufacturing Stock is a Better Buy?

Pfizer Inc. (PFE) discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. It offers medicines and vaccines in various therapeutic areas. In addition, the company is involved in the contract manufacturing business. On the other hand, Cambridge-based AstraZeneca PLC (AZN) discovers, develops, manufactures, and commercializes prescription medicines in oncology, cardiovascular, renal and metabolism, respiratory, infection, neuroscience, and gastroenterology worldwide.

The resurgence of COVID-19 cases and rising concerns over the highly transmissible omicron coronavirus variant is driving the demand for vaccines, booster shots, and other related solutions. An aging population is expected to be a key growth driver for the drug manufacturing industry. Increasing patient pool for many chronic diseases and continued innovations to treat critical conditions should keep driving the industry’s growth. According to a report by Research and Markets, the global pharmaceuticals market is expected to grow at a CAGR of 8% from 2021 to 2025. Therefore, both PFE and AZN should benefit.

PFE has gained 20.8% over the past year, while AZN has returned 0.8%. Also, PFE’s 39.6% gains year-to-date are significantly higher than AZN’s 10.3% returns. Moreover, PFE is the clear winner with 49.6% gains versus AZN’s 14.4% returns in terms of the past nine months’ performance.

But which of these two stocks is a better buy now? Let’s find out.

Latest Developments

On December 2, 2021, Amazon Web Services, Inc. announced that it is working with PFE to create innovative, cloud-based solutions with the potential to improve how new medicines are developed, manufactured and distributed for testing in clinical trials. This collaboration will support PFE in more rapidly and reliably producing new drugs and evaluating their potential health benefit for patients.

On November 23, 2021, AZN unveiled The Discovery Centre in Cambridge, UK. Pascal Soriot, CEO, AZN, said, “Our new Discovery Centre in Cambridge raises the bar for sustainable R&D and global collaboration across our industry. It will allow us to break new boundaries in the understanding of disease biology, bring life-changing medicines to patients and power the next stage of our company’s growth.”

Recent Financial Results

PFE’s revenue increased 134% year-over-year to $24.09 billion for the fiscal third quarter ended October 3, 2021. The company’s adjusted income grew 133% year-over-year to $7.69 billion. Also, its adjusted EPS came in at $1.34, up 129% year-over-year.

AZN’s revenues increased 50% year-over-year to $9.87 billion for the fiscal third quarter ended September 30, 2021. However, its net loss came in at $1.65 billion compared to a profit of $651 million in the prior-year quarter. Also, its loss per share came in at $1.10 compared to an EPS of $0.49 in the year-ago period.

Past and Expected Financial Performance

PFE’s revenue and EBIT grew at CAGRs of 9.1% and 13.6%, respectively, over the past three years. Analysts expect PFE’s revenue to increase 108.6% for the quarter ending December 31, 2021, and 94.5% in fiscal 2021. The company’s EPS is expected to grow 111% for the quarter ending December 31, 2021, and 89.6% in fiscal 2021. Moreover, its EPS is expected to grow at a rate of 100% per annum over the next five years.

On the other hand, AZN’s revenue and EBIT grew at CAGRs of 15.2% and 12.1%, respectively, over the past three years. The company’s revenue is expected to increase 48.2% for the quarter ending December 31, 2021, and 35% in fiscal 2021. Its EPS is expected to grow 49.8% for the quarter ending December 31, 2021, and 50% in fiscal 2021. AZN’s EPS is expected to grow at a rate of 20.6% per annum over the next five years.

Profitability

PFE’s trailing-12-month revenue is 2.11 times what AZN generates. PFE is also more profitable with an EBITDA margin and net income margin of 39.65% and 28.68% compared to AZN’s 19.27% and 4.48%, respectively

Furthermore, PFE’s ROE, ROA, and ROTC of 27.75%, 7.84%, and 11.49% are higher than AZN’s 5.48%, 2.35%, and 3.57%, respectively.

Valuation

In terms of forward EV/S, AZN is currently trading at 5.47x, 48.2% higher than PFE’s 3.69x. Moreover, AZN’s forward EV/EBITDA ratio of 17.85x is 79% higher than PFE’s 4.24x.

So, PFE is relatively affordable here.

POWR Ratings

PFE has an overall rating of A, which equates to a Strong Buy in our proprietary POWR Ratings system. On the other hand, AZN has an overall rating of C, which translates to Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

PFE has a B grade for Sentiment, consistent with analysts’ expectations that its EPS and revenue will increase exponentially in the upcoming months. On the other hand, AZN has a C grade for Sentiment, in sync with analysts’ expectations that its EPS and revenue will grow moderately in the near term.

Also, PFE has a B grade for Value, consistent with its forward EV/EBITDA of 9.97x, 38% lower than the industry average of 16.07x. However, AZN has a C grade for Value, in sync with its forward EV/EBITDA of 17.85x, 11.1% higher than the industry average of 16.07x.

Of the 195 stocks in the Medical - Pharmaceuticals industry, PFE is ranked #7. In comparison, AZN is ranked #41.

Beyond what I’ve stated above, we have also rated the stocks for Quality, Momentum, Stability, and Growth. Click here to view all the PFE ratings. Also, get all the AZN ratings here.

The Winner

The drug manufacturing industry is expected to grow exponentially with significant investment in research and development. While both PFE and AZN are expected to gain, it is better to bet on PFE now because of its robust financials, lower valuation, higher profitability, and better growth prospects.

Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the Medical - Pharmaceuticals industry here.

PFE shares were trading at $52.78 per share on Friday afternoon, up $0.70 (+1.34%). Year-to-date, PFE has gained 49.00%, versus a 27.14% rise in the benchmark S&P 500 index during the same period.

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.

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