Founded in 1849, Pfizer (NYSE: PFE) has transformed the lives of patients and shareholders alike. The pharmaceutical titan has been one of the best-performing stocks since the end of World War II, thanks to its powerful innovation engine, which has produced several life-altering medications such as the cholesterol-lowering drug Lipitor and the nerve pain treatment Lyrica.

In the wake of the coronavirus, though, Pfizer's shares have been on a rough ride. Since the official declaration of the end of the public health emergency earlier this year, the drugmaker's shares have slid by over 18%. And since hitting a high-water mark in late 2021, Pfizer's stock has tumbled by a breathtaking 49%. These double-digit share price declines reflect the boom-and-bust nature of most COVID-associated products.

With Pfizer's stock price at a three-year low, however, it might be the perfect time to start building a position (or adding to an established one) in the drugmaker. Here's why.

The market's myopia misses the mark.

Pfizer's downward trajectory accelerated in a big way in October (down 7.87%). Not surprisingly, this slippage stemmed from a major downward revision in the company's COVID product sales.

Moreover, this decline spilled over into some of the drugmaker's key valuation ratios, which might have had a profound impact on the stock's appeal as a potential bargain in the eyes of some investors. For example, this more-tempered 2023 outlook resulted in a sharp drop in Pfizer's earnings yield:

More importantly, though, the company's long-term outlook (which the market doesn't seem to be particularly interested in) paints a picture of a deeply undervalued dividend stock. With this all-important point in mind, let's dig deeper to unpack Pfizer's value proposition.

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What are Pfizer's underappreciated value drivers?

Pfizer has several value drivers that don't appear to be resonating with the broader market right now. First up, the drugmaker pays a ginormous 5.37% dividend yield. Although it is in the midst of a cost-reduction cycle, the company's management team doesn't appear eager to touch the quarterly payout based on its public comments. 

Second, Pfizer is expected to return to growth as soon as next year. Driven by a host of newer product launches like the respiratory syncytial virus (RSV) vaccine Abrysvo, sickle cell disease treatment Oxbryta, and migraine medicine Nurtec ODT, Wall Street's current consensus estimate has the drugmaker's top line rising by 8.1% in 2024.

Third, Pfizer's spending spree over the past few years brought in a wealth of long-term growth drivers, such as Seagen's oncology portfolio and the next-generation immunology medicine Velsipity.

The drugmaker might still have to flesh out its pipeline with a couple of smaller bolt-on acquisitions or licensing deals to overcome future patent expirations, but the company's long-term trajectory is up.

There's a fairly good chance that Pfizer's broad pipeline harbors at least a handful of drugs that will ultimately surprise Wall Street. The company's Duchenne muscular dystrophy and weight-loss assets could be those not-so-hidden gems.

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The key takeaway

Sometimes markets become irrational. And from the looks of it, we could be in one of those times. Pfizer stock screens as one of the most undervalued blue chips as a result of the market's grumpiness. But as the discussion above lays out, this extreme pessimism doesn't seem to be warranted.

Pfizer has laid the groundwork for a bright future through its varied acquisitions and pipeline development in recent years. So, if history is any guide, this pharma stock ought to work through these headwinds and return to its winning ways soon enough. Meanwhile, shareholders can sit back and collect the drugmaker's sizable dividend.

George Budwell has positions in Pfizer. The Motley Fool has positions in and recommends Pfizer and Seagen. The Motley Fool has a disclosure policy.

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