With shares of Pfizer Inc. (NYSE:PFE) trading around $24.53, is PFE a Buy, a Wait and See, or a Stay Away? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

The big story for Pfizer has been Lyrica. This new drug is used for pain treatment. The biggest selling point is that Lyrica only needs to be taken once per day. There is only one other well-known pain drug on the market that only needs to be taken once per day, which is Eli Lilly’s (NYSE:LLY) Cymbalta. Even though Lyrica might have a bright future, it’s going to be difficult to compete with Cymbalta simply because Cymbalta can also be treated for depression. On the other hand, Lyrica has the potential to perform better than GlaxoSmithKline’s (NYSE:GSK) and Xenoport’s (NASDAQ:XNPT) Horizant, which serves the same purpose as Lyrica but must be taken multiple times per day.

Recently, Lyrica showed no significant reduction in seizures for patients with epilepsy. However, at the highest doses, 45.5% of patients experienced a 50% decrease in seizure frequency. This was better than the 35.8% reduction in the placebo group. While these are encouraging numbers, they still weren’t good enough for the FDA. The good news is that Pfizer isn’t the type of company that quits. They will continue with Phase 3 Trials soon and attempt to make any necessary adjustments.

With the potential of Lyrica and a 3.60% yield, Pfizer has attracted many investors over the past few years, which can be seen in the steady ascent of the stock price.

E = Debt to Equity Ratio is Close to Zero

Pfizer has a debt-to-equity ratio of .47.This is a safe and solid number. It’s also very similar to Eli Lilly’s debt-to-equity ratio of .34. The aforementioned Xenoport has an even more impressive debt-to-equity ratio of 0.00, but this is rare, especially in this sector. Pfizer looks a lot stronger than GlaxoSmithKline in this area, which has a debt-to-equity ratio of 2.49.

Pfizer has $23 billion in cash and $31.08 billion in debt. Eli Lilly has $6.90 billion in cash and $5.51 billion in debt. Xenoport has $114.8 million in cash and $0 in debt. GlaxoSmithKline has $5.83 billion in cash and $21.06 billion in debt.

T = Technicals on the Stock Chart are Strong

As of November 21, Pfizer has underperformed the S&P 500 over the past month. Pfizer has dropped 4.90% while the S&P 500 has dropped 2.94%. That said, Pfizer has outperformed the S&P 500 on a consistent basis over the long haul.

Year-to-date, Pfizer is up 16.58% while the S&P 500 is up 12.57%. Over the past calendar year, Pfizer is up 33.06% while the S&P 500 is up 16.77%. When you look at three-year returns, Pfizer is up 49.22% while the S&P 500 is up 35.44%.

Pfizer is currently trading a few cents below its 50-day SMA of 24.76. It’s trading a few cents above its 100-day SMA of 24.19. However, what stands out most is that it’s trading moderately higher than its 200-day moving average of 23.13.

Pfizer has been a great stock to own over the past few years, and it’s likely to continue to be a great stock to own in the near future. It will suffer setbacks if the Fiscal Cliff situation doesn’t turn out well, but it will weather the storm better than most stocks.

E = Earnings are Steady Year Over Year

Pfizer is steady with its earnings, which related to the steady performance of the stock price. Investors don’t look at Pfizer as a get-rich-quick opportunity. Rather, it’s a way to help steadily build a solid portfolio. As you can see from the chart below, it’s highly unlikely to see any significant surprises.

Fiscal Year20072008200920102011
Revenue ($) in billions48.2448.3049.2767.0667.42
Diluted EPS ($)1.171.201.231.021.27

(Fiscal year is January-December.)

Pfizer earnings are rarely a surprise on a quarterly basis as well. There will be some ups and downs, but those swings will be small in nature. Analysts are expecting a slight decrease in earnings for Q4 and then a bounce back to current levels for Q1 of 2013. Below are the numbers for the past few quarters.

QuarterSept. 30, 2011Dec. 31, 2011Mar. 31, 2012June 30, 2012Sept. 30, 2012
Revenue ($) in billions16.6117.8315.4015.0613.98
Diluted EPS ($)0.480.180.240.430.43

T = Trends Support the Industry in which the Company Operates

With the FDA becoming a little more lenient due to outside pressure over the past few years, more drugs have been hitting the pipeline. Many of these drugs are potentially life-saving and/or improve the quality of life. This is a win-win situation for the FDA, pharmaceutical companies and patients. While the FDA still holds safety as their number one priority, it seems as though they’re beginning to realize that it’s better to give patients a chance.

This sector has done well over the past few years, and that trend is likely to continue. As mentioned earlier, a big market correction will negatively impact Pfizer’s stock price. At the same time, any company involved with pharmaceuticals also has the potential to pop at any given moment if there is a surprise approval. This can happen regardless of overall market conditions.

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Conclusion

If you believe in the tortoise in its race against the heir, then Pfizer is a stock to consider owning. This stock has performed extremely well over the past few years, and there is little risk for that trend to reverse course. The only big threat at the moment is the Fiscal Cliff, which would impact almost every stock.

Pfizer does have a lot of debt, but they’re not too leveraged. If they were too leveraged, you would see a large short position. That’s definitely not the case here. The Short % of the Float is only .90%. The margins are also strong, and there is over $17 billion in cash flow. Perhaps the biggest selling point is the yield. It’s also important to note that 17 of 21 analysts have a Buy rating on the stock at the current time

If good news comes out in regards to Lyrica, then Pfizer could go from slow and steady to a standout. Based on the information above, Pfizer looks like an OUTPERFORM in the long-run.

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