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

Take a closer look at MERCK & CO. INC. (NYSE:MRK), a remarkable value stock uncovered by our stock screener. NYSE:MRK excels in fundamentals and maintains a very reasonable valuation. Let's break it down further.

Assessing Valuation Metrics for NYSE:MRK

ChartMill employs its own Valuation Rating system for all stocks. This score, ranging from 0 to 10, is determined by evaluating different valuation factors, including price to earnings and free cash flow, both in absolute terms and relative to the market and industry. NYSE:MRK has earned a 7 for valuation:

• Based on the Price/Earnings ratio, MRK is valued a bit cheaper than the industry average as 79.69% of the companies are valued more expensively.
• MRK's Price/Forward Earnings ratio is rather cheap when compared to the industry. MRK is cheaper than 86.46% of the companies in the same industry.
• MRK's Price/Forward Earnings ratio indicates a valuation a bit cheaper than the S&P500 average which is at 20.94.
• MRK's Enterprise Value to EBITDA ratio is a bit cheaper when compared to the industry. MRK is cheaper than 77.60% of the companies in the same industry.
• 80.73% of the companies in the same industry are more expensive than MRK, based on the Price/Free Cash Flow ratio.
• 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.
• MRK's earnings are expected to grow with 94.66% in the coming years. This may justify a more expensive valuation.

Profitability Analysis for NYSE:MRK

ChartMill assigns a Profitability Rating to every stock. This score ranges from 0 to 10 and evaluates the different profitability ratios and margins, both absolutely, but also relative to the industry peers. NYSE:MRK scores a 8 out of 10:

• MRK has a Return On Assets of 2.18%. This is amongst the best in the industry. MRK outperforms 84.90% of its industry peers.
• Looking at the Return On Equity, with a value of 5.71%, MRK belongs to the top of the industry, outperforming 84.90% of the companies in the same industry.
• Looking at the Return On Invested Capital, with a value of 5.98%, MRK belongs to the top of the industry, outperforming 86.46% of the companies in the same industry.
• The 3 year average ROIC (12.63%) for MRK is well above the current ROIC(5.98%). The reason for the recent decline needs to be investigated.
• MRK has a Profit Margin of 3.76%. This is amongst the best in the industry. MRK outperforms 85.42% of its industry peers.
• MRK has a better Operating Margin (9.95%) than 83.33% of its industry peers.
• The Gross Margin of MRK (74.85%) is better than 80.21% of its industry peers.

Assessing Health for NYSE:MRK

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 6 out of 10:

• MRK has an Altman-Z score of 4.50. This indicates that MRK is financially healthy and has little risk of bankruptcy at the moment.
• Looking at the Altman-Z score, with a value of 4.50, MRK belongs to the top of the industry, outperforming 81.25% of the companies in the same industry.
• MRK has a debt to FCF ratio of 3.10. This is a good value and a sign of high solvency as MRK would need 3.10 years to pay back of all of its debts.
• The Debt to FCF ratio of MRK (3.10) is better than 89.58% of its industry peers.
• The current and quick ratio evaluation for MRK is rather negative, while it does have excellent solvency and profitability. These ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.

Unpacking NYSE:MRK's Growth Rating

ChartMill assigns a proprietary Growth Rating to each stock. The score is computed by evaluating various growth aspects, like EPS and revenue growth. We take into account the history as well as the estimated future numbers. NYSE:MRK was assigned a score of 4 for growth:

• MRK is expected to show a strong growth in Earnings Per Share. In the coming years, the EPS will grow by 53.11% yearly.
• The EPS growth rate is accelerating: in the next years the growth will be better than in the last years.

Every day, new Decent Value stocks can be found on ChartMill in our Decent Value screener.

Our latest full fundamental report of MRK contains the most current fundamental analsysis.

Disclaimer

This article should in no way be interpreted as advice. The article is based on the observed metrics at the time of writing, but you should always make your own analysis and trade or invest at your own responsibility.