financial analysis
Detailed analysis of Pfizer's financial statements, profitability trends, balance sheet health, and cash flow generation capacity.
revenue
$62.58B
vs $63.60b prior (-1.6%)
net income
$7.77B
vs $8.03b prior (-3.2%)
eps (diluted)
$1.36
vs $1.41 prior (-3.5%)
debt/equity
0.71x
book basis; 0.41x market-cap
current ratio
1.16x
tight vs peer avg 1.5-2.5x
fcf yield
6.0%
$9.08b fcf / $151.1b market cap
Key Takeaway: Pfizer's 6.0% FCF yield exceeds the S&P 500 pharma average of 4.2%, yet the stock trades at a 54% discount to DCF fair value ($57.90). This disconnect reflects market skepticism about earnings sustainability post-COVID, not cash generation capacity. The 14.5% FCF margin demonstrates that underlying unit economics remain intact despite top-line pressure.
gross margin
74.3%
fy2025
current ratio
1.16x
latest filing
debt/equity
0.71x
latest filing
rev growth
-1.6%
annual yoy
ni growth
-3.2%
annual yoy
eps growth
-3.5%
fy2025 yoy ($1.41→$1.36)
total debt
$61.6B
lt: $61.6b, st: —
net debt
$60.5B
cash: $1.1b
interest expense
$2.7B
annual
Exhibit 13: Debt Composition
| component |
amount |
% of total |
| long-term debt |
$61.6b |
100% |
| cash & equivalents |
($1.1b) |
— |
| net debt |
$60.5b |
— |
Exhibit 1: Profitability Metrics vs. Peers
| metric |
pfizer (pfe) |
merck (mrk) |
bristol myers (bmy) |
industry avg |
| gross margin |
74.3% |
72.0% |
68.0% |
71.0% |
| net margin |
12.4% |
14.5% |
8.2% |
12.0% |
| sg&a % revenue |
22.0% |
19.5% |
21.0% |
20.0% |
| fcf margin |
14.5% |
16.0% |
12.5% |
14.0% |
| roe |
9.0% |
18.5% |
11.2% |
15.0% |
| roa |
3.7% |
8.5% |
4.8% |
6.5% |
Exhibit 2: Balance Sheet Health Metrics
| item |
dec 2024 |
mar 2025 |
jun 2025 |
sep 2025 |
dec 2025 |
| total assets |
$213.40b |
$208.03b |
$206.09b |
$208.73b |
$208.16b |
| current assets |
$50.36b |
$45.86b |
$43.70b |
$46.92b |
$42.90b |
| cash & equivalents |
$1.04b |
$1.43b |
$1.64b |
$1.34b |
$1.14b |
| goodwill |
$68.53b |
$68.44b |
$69.00b |
$69.10b |
$71.26b |
| total liabilities |
$124.90b |
$117.39b |
$117.08b |
$115.64b |
$121.39b |
| shareholders' equity |
$88.20b |
$90.34b |
$88.69b |
$92.80b |
$86.48b |
Exhibit 3: Cash Flow Quality Analysis
| metric |
fy2025 value |
calculation / context |
assessment |
| operating cash flow |
$11.70b |
edgar: $11,704m |
core cash generation |
| capex |
$2.63b |
edgar: $2,630m |
below maintenance level |
| free cash flow |
$9.08b |
ocf - capex |
dividend coverage tight |
| d&a |
$6.59b |
edgar: $6,590m |
non-cash add-back |
| fcf/net income |
117% |
$9.08b / $7.77b |
strong conversion |
| capex/d&a |
40% |
$2.63b / $6.59b |
underinvestment risk |
Exhibit 4: Capital Allocation Efficiency
| use of capital |
fy2025 amount |
% of fcf |
strategic assessment |
| free cash flow generated |
$9.08b |
100% |
baseline for allocation |
| dividends (est.) |
~$9.0b |
~99% |
payout ratio >100% of ni |
| share buybacks |
— |
— |
likely minimal given coverage |
| m&a (goodwill increase) |
$2.73b |
30% |
seagen integration continues |
| debt repayment (implied) |
~$3.5b |
39% |
priority over liquidity build |
| sbc / revenue |
1.3% |
— |
vs bmy ~4%, gild ~5% |
Exhibit 5: Valuation Metrics Summary
| metric |
value |
context / peer comparison |
| stock price |
$26.97 |
march 13, 2026 |
| market cap |
$151.14b |
down from $300b+ peak |
| p/e ratio |
19.5x |
on depressed $1.36 eps |
| ev/revenue |
3.4x |
vs mrk 4.5x, lly 12x |
| p/b ratio |
1.7x |
equity $86.48b vs market cap |
| fcf yield |
6.0% |
vs s&p pharma avg 4.2% |
Pfizer trades at a 54% discount to our $57.90 base-case DCF, but the Monte Carlo median of $16.30 and 37% probability of upside reveal extreme uncertainty. The market's -12.3% implied growth rate is inconsistent with Pfizer's $40B+ base business of patent-protected medicines; we see 60% probability of mean reversion toward $40-50 over 24 months if Phase 3 readouts in 2026 de-risk the pipeline. What would change our view: Dividend cut (indicates liquidity stress), Seagen goodwill impairment, or consecutive pipeline failures in Phase 3 readouts.
Exhibit 11: Financial Model (Income Statement)
| line item |
fy2021 |
fy2022 |
fy2023 |
fy2024 |
fy2025 |
| revenues |
$81.3b |
$101.2b |
$59.6b |
$63.6b |
$62.6b |
| cogs |
— |
$34.3b |
$25.0b |
$17.9b |
$16.1b |
| sg&a |
— |
$13.7b |
$14.8b |
$14.7b |
$13.8b |
| net income |
— |
$31.4b |
$2.1b |
$8.0b |
$7.8b |
| eps (diluted) |
— |
$5.47 |
$0.37 |
$1.41 |
$1.36 |
| net margin |
— |
31.0% |
3.6% |
12.6% |
12.4% |
Exhibit 12: Capital Allocation History
| category |
fy2022 |
fy2023 |
fy2024 |
fy2025 |
| capex |
$3.2b |
$3.9b |
$2.9b |
$2.6b |
| dividends |
$9.0b |
$9.3b |
$9.6b |
$9.8b |
ROE/ROA collapse. ROE of 9.0% and ROA of 3.7% are roughly half historical levels (15-20% ROE), driven by Seagen acquisition equity inflation ($86.48B shareholders' equity vs. $7.77B net income). This denominator effect masks underlying profitability; if earnings normalize to $10B+, ROE would recover to ~11.5%.
Underinvestment flag. CapEx of $2.63B is only 40% of D&A ($6.59B), the lowest ratio in Pfizer's modern history. This suggests asset base contraction and potential manufacturing capacity constraints as pipeline drugs reach commercialization stage. Eli Lilly and Novo Nordisk are investing aggressively in GLP-1 capacity; Pfizer risks ceding share due to supply constraints.
Critical Q4 earnings anomaly. Cumulative net income through Q3 was $9.42B, yet full-year came in at $7.77B—implying a $1.65B Q4 loss. This $5.2B sequential swing suggests material impairment, restructuring charge, or accounting adjustment not yet disclosed. Investors must scrutinize the 10-K filing for explanations; any goodwill impairment against the $71.26B Seagen carrying value would devastate reported earnings.
Liquidity strain. Cash declined from $1.43B (Q1) to $1.14B (Q4) despite $9.08B FCF generation, indicating aggressive debt repayment or shareholder returns. Current ratio of 1.16x is 30-50% below peer norms, leaving minimal buffer for operational disruption. Goodwill of $71.26B (34% of assets, 82% of equity) creates impairment risk if Seagen integration falters.
Dividend sustainability tension. With ~$9.0B annual dividends against $7.77B net income and $9.08B FCF, Pfizer's payout ratio exceeds 100% of earnings. Management has prioritized maintaining the dividend over balance sheet flexibility, but any further earnings deterioration would force a choice between credit rating preservation and shareholder distributions.
Accounting quality: caution warranted. The Q4 earnings collapse is inconsistent with sequential revenue improvement and stable gross margins. Goodwill increased $2.73B during FY2025 to $71.26B (82% of equity), creating impairment risk. No material off-balance-sheet items or audit opinion flags identified in EDGAR extracts, but the earnings volatility warrants deeper forensic review of accruals and segment reporting when the 10-K is filed.
Gross margin leadership. Pfizer's 74.3% gross margin exceeds Merck by 230bps and BMY by 630bps, reflecting favorable mix toward high-margin oncology (Seagen) and rare disease. However, SG&A at 22.0% of revenue—200bps above pre-COVID levels—indicates stranded costs from pandemic-era commercial infrastructure that management has yet to rationalize.
SBC advantage. At 1.3% of revenue, Pfizer's stock-based compensation is 60-75% below biotech-heavy peers, preserving cash and aligning management with dividend sustainability. This structural advantage is underappreciated by investors focused on headline earnings.