Is This the Best Value Stock to Buy While Markets Are Volatile?

You may have noticed that the markets are exceptionally volatile at the moment. That's true whether we're talking about stocks, cryptocurrencies, or commodities.

During turbulent times, many investors run for the hills. Some sell everything and park their money in cash. Others, however, seek safe havens. For example, value stocks in sectors that tend to perform well during choppy market conditions could appeal to many investors.

That brings me to Pfizer (NYSE: PFE). Is this the best value stock to buy while markets are volatile?

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Pfizer's volatility-resistant qualities

I've already alluded to one aspect of Pfizer that makes it resilient to volatility. Healthcare stocks typically fare better than most during stormy market periods. There's a simple reason why this is true: people need many healthcare products and services, regardless of what's happening with the economy or the stock market. This translates to relatively steady revenue and profits for healthcare companies.

Just look at Pfizer's top-selling blockbuster drugs. What doctor is going to stop prescribing Eliquis for patients with blood clots because the stock market is choppy? Will patients with transthyretin-mediated amyloidosis (ATTR) quit taking Vyndamax due to market swings? Of course not.

Pfizer's dividend could also make the stock more attractive to investors during market turbulence. The big pharma company's forward dividend yield is a juicy 6.9%. Importantly, Pfizer is generating ample free cash flow to cover the dividend payments.

Perhaps the most compelling proof of Pfizer's volatility-resistant qualities is the stock's five-year monthly beta of only 0.43. The lower the beta value is, the less volatile the stock is compared to the overall market.

Is Pfizer really a value stock?

This might seem to be a silly question, but is Pfizer really a value stock? After all, its shares trade at a forward price-to-earnings (P/E) ratio of 8.3. That's lower than Pfizer's historical average and only a fraction of the healthcare sector's forward earnings multiple of 18.2. However, there are two potential objections to classifying Pfizer as a true value stock.

First, the company's future growth prospects are suspect. Pfizer faces a major patent cliff. Autoimmune disease drug Xeljanz and blood thinner Eliquis lose U.S. patent protection next year (although generic rivals to Eliquis won't enter the market until 2028). Breast cancer drug Ibrance and prostate cancer drug Xtandi lose patent exclusivity in 2027.

Second, the company's significant debt clouds the picture somewhat. Valuation metrics based on enterprise value arguably provide a better barometer for Pfizer. The pharma stock isn't expensive based on its enterprise value-to-EBITDA ratio of 10.2, but it's not quite as cheap as the forward earnings multiple suggests.

Still, I view Pfizer as a value stock. And I don't think it's a value trap, either. The drugmaker has enough products in its lineup that don't face losses of exclusivity in the near future and several promising late-stage pipeline candidates that should largely offset the anticipated revenue declines due to its patent cliff.

In particular, Pfizer's acquisitions have put it in a stronger position to successfully navigate its wave of exclusivity losses. The company's latest acquisition is the buyout of Metsera for up to $10 billion (around $7 billion upfront, with the remainder contingent upon achieving specified clinical and regulatory milestones). This deal holds the potential to make Pfizer a major player in the lucrative obesity drug market.

The best value stock to buy during high market volatility?

But is Pfizer the best value stock to buy during high market volatility? I wouldn't necessarily go that far. There are other contenders – and, quite frankly, I haven't researched all of them.

That said, I think Pfizer is a good value stock to buy when markets are turbulent. I like the ultra-high-yield dividend. I also think the company's growth prospects are better than they might appear at first glance.

Keith Speights has positions in Pfizer. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy.