Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. Importantly, Pfizer Inc. (NYSE:PFE) does carry debt. But is this debt a concern to shareholders?
Why Does Debt Bring Risk?
Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.
Check out our latest analysis for Pfizer
What Is Pfizer's Debt?
As you can see below, Pfizer had US$40.5b of debt, at July 2022, which is about the same as the year before. You can click the chart for greater detail. However, because it has a cash reserve of US$33.3b, its net debt is less, at about US$7.18b.
NYSE:PFE Debt to Equity History August 15th 2022
How Healthy Is Pfizer's Balance Sheet?
We can see from the most recent balance sheet that Pfizer had liabilities of US$47.4b falling due within a year, and liabilities of US$60.4b due beyond that. Offsetting this, it had US$33.3b in cash and US$17.7b in receivables that were due within 12 months. So it has liabilities totalling US$56.8b more than its cash and near-term receivables, combined.
Pfizer has a very large market capitalization of US$281.2b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt.
We measure a company's debt load relative to its earnings power by looking at its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and by calculating how easily its earnings before interest and tax (EBIT) cover its interest expense (interest cover). Thus we consider debt relative to earnings both with and without depreciation and amortization expenses.
Pfizer has a low net debt to EBITDA ratio of only 0.16. And its EBIT easily covers its interest expense, being 37.8 times the size. So we're pretty relaxed about its super-conservative use of debt. Even more impressive was the fact that Pfizer grew its EBIT by 162% over twelve months. That boost will make it even easier to pay down debt going forward. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Pfizer's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.
Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. So we clearly need to look at whether that EBIT is leading to corresponding free cash flow. Over the last three years, Pfizer actually produced more free cash flow than EBIT. There's nothing better than incoming cash when it comes to staying in your lenders' good graces.
Our View
The good news is that Pfizer's demonstrated ability to cover its interest expense with its EBIT delights us like a fluffy puppy does a toddler. And that's just the beginning of the good news since its conversion of EBIT to free cash flow is also very heartening. Considering this range of factors, it seems to us that Pfizer is quite prudent with its debt, and the risks seem well managed. So we're not worried about the use of a little leverage on the balance sheet. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example Pfizer has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.
Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
馬克斯説得很好,他不是擔心股價波動,而是我擔心的是永久虧損的可能性……我認識的每個實際投資者都擔心。因此,當你考慮到任何一隻股票的風險有多大時,你需要考慮債務可能是顯而易見的,因為太多的債務可能會讓一家公司倒閉。重要的是輝瑞。(紐約證券交易所代碼:PFE)確實揹負着債務。但這筆債務對股東來説是一個擔憂嗎?
為什麼債務會帶來風險?
債務幫助企業,直到企業難以償還債務,無論是用新資本還是用自由現金流。資本主義的一部分是“創造性破壞”的過程,破產的企業被銀行家無情地清算。然而,更常見(但代價仍然高昂)的情況是,一家公司必須以極低的價格發行股票,永久性地稀釋股東的股份,只是為了支撐其資產負債表。當然,債務的好處是,它往往代表着廉價資本,特別是當它用能夠以高回報率進行再投資的能力取代公司的稀釋時。當考慮一家企業使用了多少債務時,首先要做的是把現金和債務放在一起看。
查看我們對輝瑞的最新分析
輝瑞的債務是什麼?
如下所示,截至2022年7月,輝瑞的債務為405億美元,與前一年大致相同。您可以單擊圖表查看更多詳細信息。然而,由於它擁有333億美元的現金儲備,其淨債務較少,約為71.8億美元。
紐約證券交易所:PFE債轉股歷史2022年8月15日
輝瑞的資產負債表有多健康?
我們可以從最近的資產負債表中看到,輝瑞有474億美元的負債在一年內到期,還有604億美元的負債在這之後到期。作為抵消,它有333億美元的現金和177億美元的應收賬款在12個月內到期。因此,它的負債總額比現金和近期應收賬款加起來還要多568億美元。
輝瑞擁有2812億美元的非常大的市值,因此如果需要的話,它很可能會籌集現金來改善其資產負債表。然而,仍值得密切關注其償債能力。
我們通過查看公司的淨債務除以利息、税項、折舊和攤銷前收益(EBITDA),並計算其息税前收益(EBIT)覆蓋利息支出(利息覆蓋)的容易程度,來衡量公司的債務負擔與其盈利能力的關係。因此,我們考慮債務相對於收益,包括折舊和攤銷費用。
輝瑞的淨債務與EBITDA之比較低,僅為0.16。而且它的息税前利潤很容易彌補利息支出,是其規模的37.8倍。因此,我們對它對債務的超級保守使用相當放鬆。更令人印象深刻的是,輝瑞的息税前利潤在12個月內增長了162%。這一提振將使未來償還債務變得更加容易。毫無疑問,我們從資產負債表中瞭解到的債務最多。但最重要的是,未來的收益將決定輝瑞未來保持健康資產負債表的能力。因此,如果你想看看專業人士的想法,你可能會發現這份關於分析師利潤預測的免費報告很有趣。
最後,企業需要自由現金流來償還債務;會計利潤只是不能削減這一點。因此,我們顯然需要看看息税前利潤是否會帶來相應的自由現金流。在過去的三年裏,輝瑞產生的自由現金流實際上超過了息税前利潤。説到贏得貸款人的好感,沒有什麼比收到的現金更好的了。
我們的觀點
好消息是,輝瑞被證明有能力通過息税前利潤來支付利息支出,這讓我們感到高興,就像毛茸茸的小狗對待蹣跚學步的孩子一樣。這只是好消息的開始,因為它將息税前利潤轉換為自由現金流也非常令人鼓舞。考慮到這一系列因素,在我們看來,輝瑞似乎對其債務相當謹慎,風險似乎得到了很好的管理。因此,我們並不擔心在資產負債表上使用一點槓桿。在分析債務水平時,資產負債表顯然是一個起點。然而,並非所有投資風險都存在於資產負債表中--遠非如此。例如,輝瑞有2個警告標誌(1)我們認為你應該知道這一點。
當然,如果你是那種喜歡在沒有債務負擔的情況下購買股票的投資者,那麼不要猶豫,今天就來看看我們的淨現金成長型股票獨家名單。
對這篇文章有什麼反饋嗎?擔心內容嗎? 保持聯繫直接與我們聯繫。或者,也可以給編輯組發電子郵件,地址是implywallst.com。
本文由Simply Wall St.撰寫,具有概括性。我們僅使用不偏不倚的方法提供基於歷史數據和分析師預測的評論,我們的文章並不打算作為財務建議。它不構成買賣任何股票的建議,也沒有考慮你的目標或你的財務狀況。我們的目標是為您帶來由基本面數據驅動的長期重點分析。請注意,我們的分析可能不會將最新的對價格敏感的公司公告或定性材料考慮在內。Simply Wall St.對上述任何一隻股票都沒有持倉。