Pfizer ( PFE - news - people ): The drug giant is down 25% or so this year, with shares now selling for about half what they traded for two years ago. But it's big and its drugs are popular--they include Celebrex, Lipitor, Zoloft and a myriad of others--and the stock gets approval from two of my guru strategies.
My Peter Lynch-based model sees Pfizer as a "stalwart" because of its size (annual sales over $48 billion) and moderate 13.65% earnings per share growth rate. (I calculate EPS growth using an average of the three-, four- and five-year figures). Lynch typically kept some of these stalwarts in his portfolio because they tend to offer protection against downturns or recessions.
When it came to finding undervalued stocks, Lynch was known for using the P/E/Growth ratio (which divides the P/E ratio by the firm's historical growth rate), with P/E/Gs below 1.0 acceptable and those below 0.5 the best case. Pfizer's yield-adjusted P/E/G is a strong 0.47, passing this critical Lynch-based test. Lynch also liked conservatively financed firms, and Pfizer's 30% debt/equity ratio comes in well below my Lynch-based model's 80% upper limit.
My O'Shaughnessy-based model, meanwhile, likes Pfizer's $88 billion market cap and high sales, as well as its solid $1.95 cash flow per share. The stock's 9.8% dividend is a big added bonus too.
The FDA and the spIEEEd of their approval process. At the extreme and with several approvals of drugs in PHASE III, this stock could conceivable make an all time high. For the time being, I am kIEEEping my target price of $19.15 for 'o9 with a "buy" rating.