Assignment 2: Investment Analysis

Investment Selection

Mereka McKoy

Strayer University FIN 320: Investments Professor: Ahmad Rawish

October 26, 2019

Company profile

The company selected for this assignment is Pfizer pharmaceutical company. Pfizer is an American multinational corporation based in New York, and trades at the NYSE under trade name PFE. The firm has one of the most diversified portfolios in the global healthcare markets ranging from humans to animals. PFE major revenue earner is the sales from the biopharmaceuticals products. Its portfolio comprises of both biologic and molecular drugs, as well as vaccines among other renowned consumables. Some of the chosen firm major competitors include GlaxoSmithKline, Novartis, Sanofi, Biogen Idec, and Genentech among many others (Pfizer Inc., 2019).

Company development truck record

Over the past five years the demand within the industry remains unsteady from the achieved sales and revenue patterns. A similar trend is replicated by the industry whose revenue is unsteady, i.e., increase and decline over the successive years under review. Some of the dominant factors influencing the demand and supply for pharmaceutical products within the sector include political, environmental, social, legal, economic, and technological factors. Other special focus is also placed on the R&D capabilities and the status of managed care and insurer plan within a country, along with other FDA, marketing issues, and the cost of prescription drugs (Ballestero et al., 2019).

However, for PFE some of the significant events that have resulted in decline in revenue were for reasons of expansive rebates from the delayed approval inhibitor Palbociclib (PD-0332991) advancement as a designated chemotherapy drug for breast cancer treatment which was still under FDA evaluation by 2014 (Taylor, 2015). The assumption was that the firm continued to spend on R&D process for chemotherapy drugs whose release to the market were being derailed by FDA regulatory procedures for drug admittance into the market. Also, there were substantial increase in revenue in 2017 following the approval for the use of Prevnar 13 pneumococcal in pneumonia prevention and other invasive diseases prevention for the adult patients in 2017 (Pfizer Inc., 2019).

The decision to invest

To achieve an investment decision, it is critical to evaluate the current year sales revenue, as well as the net earnings to sales revenue and net earnings pattern for the five periods under review. Such can be determined by computing for the annual growth rate in both sales and revenue for the firm within the last five years e.g., where revenue in FY1 is $100 million and FY2 revenue is $125 million then the revenue growth rate will be 25% (Ballestero et al., 2019). Therefore, the earning trend for FPE over the last five years is as follows:

Year	2018	2017	2016	2015	2014
Revenues	53,647	52,546	52,824	48,851	49,605
The percentage (%) change in Rev.	2.1%	-0.53%	7.52%	1.14%	-4%
Net income	11,153	21,308	7,215	6,960	9,135
The percentage (%) change in Net Inc.	-91%%	66.14%	3.53%	-31.25%	-141%

From the above information revenue and income only increased in FY2016 and the figures remained inconsistent in before that and in the subsequent years. Apparently, the declining trend can be read for the entire industry and it means that the sector is underperforming and any investor should be cautious in investing in the sector and even for the firm in question (Taylor, 2015; Ballestero et al., 2019).

Also, a decision to invest should be approach at from the perspective of gross margins as achievable by the company income statement over the consecutive five-year period under review.

Year	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Gross profit margin	70.16%	78%	78.3%	78.8%	70.16%
Gross Income Growth	2.37%	-0.27%	3.29%	-1.66%	-

Again, an observable trend the firm is performing rather poorly as it is not managing its revenue to faster increase its gross margins, further resulting in the construction of its investment results. Factors that may be causing the instability in its gross margins may be due to mismanagement (Taylor, 2015; Pfizer Inc., 2019).

References

Ballestero, E., Pérez-Gladish, B., & Garcia-Bernabeu, A. (2015). Socially responsible investment. A Multi-criteria Decision Making Approach. International Series in Operations Research & Management Science, 219.

Pfizer Inc. (2019). Pfizer Inc. - AnnualReports.com. Retrieved 1 November 2019, from http://www.annualreports.com/Company/pfizer-inc

Taylor, D. (2015). The pharmaceutical industry and the future of drug development.

Appendices