Summary
- Operational cash flows continue to increase.
- They continue to cover financing and investing activities.
- Remaining long.
- This idea was discussed in more depth with members of my private investing community, Elevation Code. Start your free trial today »
Strong cash flows in the pharmaceutical sector are imperative. It stands to reason that the bigger companies in this space have a higher probability of developing breakthrough drugs. This is one of the principal reasons why we remain long Pfizer (PFE). The significant cash flows the company is able to spin off every quarter ultimately pave the way for the next generation of blockbuster hopefuls.
Large-cap companies in this space have a distinct advantage because their cash flows enable them to be able to develop a significant amount of potential blockbusters in their pipelines. Smaller players don't have this luxury. In the end, it comes down to being a numbers game. For example, at present, we like how the fundamentals are shaping up with respect to the company's pipeline in the immunology and cancer areas. Success is important here due to the pending patent loss of Lyrica in the US.
Pfizer is expected to do $53.61 billion in top-line revenues in fiscal 2018, which would result in a 2% growth rate. The following year though, top-line sales are expected to decline to a 1.7% growth rate. Growing revenues in the pharmaceutical sector are crucial in that they provide the crucial cash flows to develop the pipeline going forward. Remember, Pfizer also pays out a generous 3.4% dividend yield which obviously also comes from the firm's cash flows. Therefore, from these standpoints, let's have a look how Pfizer's cash flows and dividend are trending at present.
