NYSE:MRK is probably undervalued for the fundamentals it is displaying.

Last update: Mar 20, 2024

Discover MERCK & CO. INC. (NYSE:MRK)—an undervalued stock our stock screener has picked out. NYSE:MRK demonstrates solid fundamentals, including health and profitability, all while staying attractively priced. Let's explore the details.

A Closer Look at Valuation for NYSE:MRK

An integral part of ChartMill's stock analysis is the Valuation Rating, which spans from 0 to 10. This rating evaluates diverse valuation factors, including price to earnings and cash flows, while considering the stock's profitability and growth. NYSE:MRK has received a 7 out of 10:

79.10% of the companies in the same industry are more expensive than MRK, based on the Price/Earnings ratio.
85.07% of the companies in the same industry are more expensive than MRK, based on the Price/Forward Earnings ratio.
When comparing the Price/Forward Earnings ratio of MRK to the average of the S&P500 Index (22.25), we can say MRK is valued slightly cheaper.
Compared to the rest of the industry, the Enterprise Value to EBITDA ratio of MRK indicates a somewhat cheap valuation: MRK is cheaper than 77.11% of the companies listed in the same industry.
Based on the Price/Free Cash Flow ratio, MRK is valued cheaply inside the industry as 80.10% of the companies are valued more expensively.
The low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company.
The excellent profitability rating of MRK may justify a higher PE ratio.
A more expensive valuation may be justified as MRK's earnings are expected to grow with 93.43% in the coming years.

Profitability Examination for NYSE:MRK

ChartMill employs its own Profitability Rating system for stock evaluation. This score, ranging from 0 to 10, is derived from an analysis of diverse profitability metrics and margins. In the case of NYSE:MRK, the assigned 8 is noteworthy for profitability:

The Return On Assets of MRK (0.34%) is better than 82.09% of its industry peers.
MRK's Return On Equity of 0.97% is amongst the best of the industry. MRK outperforms 83.58% of its industry peers.
MRK has a better Return On Invested Capital (3.97%) than 82.09% of its industry peers.
The last Return On Invested Capital (3.97%) for MRK is well below the 3 year average (12.63%), which needs to be investigated, but indicates that MRK had better years and this may not be a problem.
MRK has a Profit Margin of 0.61%. This is amongst the best in the industry. MRK outperforms 82.59% of its industry peers.
The Operating Margin of MRK (6.76%) is better than 80.60% of its industry peers.
Looking at the Gross Margin, with a value of 73.53%, MRK belongs to the top of the industry, outperforming 80.10% of the companies in the same industry.

Analyzing Health Metrics

ChartMill assigns a Health Rating to every stock. This score ranges from 0 to 10 and evaluates the different health aspects like liquidity and solvency, both absolutely, but also relative to the industry peers. NYSE:MRK scores a 5 out of 10:

MRK has an Altman-Z score of 4.16. This indicates that MRK is financially healthy and has little risk of bankruptcy at the moment.
MRK has a better Altman-Z score (4.16) than 79.60% of its industry peers.
MRK has a debt to FCF ratio of 3.83. This is a good value and a sign of high solvency as MRK would need 3.83 years to pay back of all of its debts.
MRK has a better Debt to FCF ratio (3.83) than 89.05% of its industry peers.

How do we evaluate the Growth for NYSE:MRK?

To evaluate a stock's growth potential, ChartMill utilizes a Growth Rating on a scale of 0 to 10. This comprehensive assessment considers various growth aspects, including historical and estimated EPS and revenue growth. NYSE:MRK has achieved a 4 out of 10:

The Earnings Per Share is expected to grow by 50.72% on average over the next years. This is a very strong growth
The EPS growth rate is accelerating: in the next years the growth will be better than in the last years.

More Decent Value stocks can be found in our Decent Value screener.

For an up to date full fundamental analysis you can check the fundamental report of MRK

Disclaimer

This is not investing advice! The article highlights some of the observations at the time of writing, but you should always make your own analysis and invest based on your own insights.