Moderna and Pfizer became household names during the past two years, as they (along with BioNTech BNTX) brought COVID-19 vaccinations to market in record time. Today, both companies are working to add an omicron-based component to their mRNA booster shots.
Given their ongoing role in the fight against COVID-19, this month’s stock-versus-stock feature looks at which is the better stock to buy now based on Morningstar’s proprietary metrics. Is it time to buy Moderna stock? Or is it time to buy Pfizer stock?
As part of this feature, we’re providing free access to a portion of the Morningstar Analyst Reports for both companies for a few weeks. By using the Analyst Reports for Moderna stock and Pfizer stock, an investor can dig into some of Morningstar’s proprietary metrics more deeply and find out what our analysts have to say about each company’s business strategy. Investors will find that Moderna and Pfizer are very different companies. Investors also have access to similar metrics about close competitors and the bull and bear cases for both stocks. Just click through the links below to access the complete reports for each stock.
Here’s how Moderna and Pfizer scored on some key investment metrics as of July 13, 2022:
Moderna Stock MRNA
- Price/Fair Value: 0.74
- Morningstar Uncertainty Rating: Very High
- Morningstar Economic Moat Rating: None
- Morningstar Capital Allocation Rating: Standard
Pfizer Stock PFE
- Price/Fair Value: 1.08
- Morningstar Uncertainty Rating: Medium
- Morningstar Economic Moat Rating: Wide
- Morningstar Capital Allocation Rating: Standard
Who wins this stock-versus-stock matchup? That depends on which Morningstar metrics matter most to an investor. Let’s take a deeper dive into four of them.
Price/Fair Value Winner: Moderna
Morningstar’s analysts calculate a fair value estimate for each stock they cover. The fair value estimate represents the intrinsic value of a stock, based on how much cash we think the company can generate in the future. A stock’s price/fair value is simply its current market price divided by the fair value estimate. A stock trading below 1.0 is undervalued; a stock trading around 1.0 is fairly valued; and a stock trading above 1.0 is overvalued.
As of this writing, we think Moderna’s stock is about 26% undervalued, while Pfizer’s stock is 8% overvalued. The winner from a price perspective is Moderna stock, which is trading at a more attractive price today.
Uncertainty Winner: Pfizer
The Morningstar Uncertainty Rating represents the predictability of a company’s future cash flows and, therefore, the level of certainty we have in our fair value estimate of a given company. Companies that enjoy sales predictability, modest operating and financial leverage, and limited exposure to contingent events carry lower Uncertainty Ratings; those with less-predictable sales, significant leverage, and significant exposure to contingent events carry higher Uncertainty Ratings.
Our analysts think Pfizer’s cash flow uncertainty is Medium, while Moderna’s is Very High. Pfizer stock wins for its lower Uncertainty Rating because we’re more confident in our fair value estimate of that stock.
Economic Moat Winner: Pfizer
The Morningstar Economic Moat Rating represents a company’s maintainable competitive advantage. A company with an economic moat can fend off competition and earn high returns on capital for many years to come. A company whose competitive advantages we expect to last more than 20 years has a wide moat, one that can fend off its rivals for 10 years has a narrow moat, while a firm with either no advantage or one that we think will quickly dissipate has no moat.
Our analysts think Pfizer has carved out a wide economic moat, while Moderna has not yet carved out a moat. Pfizer has the edge here.
Capital Allocation Winner: Tie
The Morningstar Capital Allocation Rating represents our assessment of how well a company manages its balance sheet, investments, and shareholder distributions. Analysts assign each company one of three ratings—Exemplary, Standard, or Poor—based on their assessments of how well a management team provides shareholder returns. Adept corporate managers can make a good company even better.
Both companies earn Standard capital allocation ratings. It’s therefore a tie.
Which Is the Best Stock to Buy Today?
At the end of the day, the “winner” of any stock-versus-stock comparison from Morningstar’s perspective is the stock that’s trading at the largest discount to our fair value estimate after being adjusted for uncertainty. The Morningstar Rating for stocks encapsulates just that. Stocks rated 4 and 5 stars are undervalued after being adjusted for uncertainty, stocks rated 3 stars are fairly valued, and stocks rated 1 or 2 stars are overvalued after being adjusted for uncertainty.
Moderna stock earns a 4-star rating as of this writing, while Pfizer stock earns a 3-star rating. Moderna is the better stock to buy today from Morningstar’s perspective.
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The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.