NYSE:MRK is an undervalued gem with solid fundamentals.

Last update: Aug 7, 2024

MERCK & CO. INC. (NYSE:MRK) was identified as a decent value stock by our stock screener. NYSE:MRK scores well on profitability, solvency and liquidity. At the same time it seems to be priced very reasonably. We'll explore this a bit deeper below.

Unpacking NYSE:MRK's Valuation Rating

ChartMill assigns a proprietary Valuation Rating to each stock. The score is computed by evaluating various valuation aspects, like price to earnings and free cash flow, both absolutely as relative to the market and industry. NYSE:MRK was assigned a score of 8 for valuation:

MRK's Price/Earnings ratio is rather cheap when compared to the industry. MRK is cheaper than 84.97% of the companies in the same industry.
MRK is valuated rather cheaply when we compare the Price/Earnings ratio to 28.66, which is the current average of the S&P500 Index.
With a Price/Forward Earnings ratio of 10.91, the valuation of MRK can be described as very reasonable.
Compared to the rest of the industry, the Price/Forward Earnings ratio of MRK indicates a rather cheap valuation: MRK is cheaper than 87.56% of the companies listed in the same industry.
MRK's Price/Forward Earnings ratio indicates a valuation a bit cheaper than the S&P500 average which is at 20.17.
Based on the Enterprise Value to EBITDA ratio, MRK is valued a bit cheaper than the industry average as 78.24% of the companies are valued more expensively.
Based on the Price/Free Cash Flow ratio, MRK is valued cheaply inside the industry as 81.87% 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 95.43% in the coming years.

How do we evaluate the Profitability for NYSE:MRK?

ChartMill's Profitability Rating offers a unique perspective on stock analysis, providing scores from 0 to 10. These ratings consider a wide range of profitability metrics and margins, both in comparison to industry peers and on their own merits. For NYSE:MRK, the assigned 8 is a significant indicator of profitability:

The Return On Assets of MRK (2.18%) is better than 84.46% 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 84.46% of the companies in the same industry.
MRK has a better Return On Invested Capital (5.98%) than 86.01% of its industry peers.
The last Return On Invested Capital (5.98%) 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.
Looking at the Profit Margin, with a value of 3.76%, MRK belongs to the top of the industry, outperforming 84.97% of the companies in the same industry.
Looking at the Operating Margin, with a value of 9.96%, MRK belongs to the top of the industry, outperforming 83.42% of the companies in the same industry.
With an excellent Gross Margin value of 74.85%, MRK belongs to the best of the industry, outperforming 80.31% of the companies in the same industry.

Health Assessment of NYSE:MRK

ChartMill employs a unique Health Rating system for all stocks. This rating, ranging from 0 to 10, is determined by analyzing various liquidity and solvency ratios. For NYSE:MRK, the assigned 5 for health provides valuable insights:

An Altman-Z score of 4.17 indicates that MRK is not in any danger for bankruptcy at the moment.
With a decent Altman-Z score value of 4.17, MRK is doing good in the industry, outperforming 76.68% 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 89.64% of its industry peers.

Growth Analysis 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 5 out of 10:

MRK shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 131.67%, which is quite impressive.
Based on estimates for the next years, MRK will show a very strong growth in Earnings Per Share. The EPS will grow by 53.11% on average per year.
When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.

Our Decent Value screener lists more Decent Value stocks and is updated daily.

Check the latest full fundamental report of MRK for a complete fundamental analysis.

Keep in mind

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.