NYSE:MRK appears to be flying under the radar despite its strong fundamentals.

Last update: Nov 21, 2024

Our stock screener has singled out MERCK & CO. INC. (NYSE:MRK) as a stellar value proposition. NYSE:MRK not only scores well in profitability, solvency, and liquidity but also maintains a very reasonable price point. We'll explore this further.

Understanding NYSE:MRK's Valuation Score

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 9 for valuation:

MRK's Price/Earnings ratio is rather cheap when compared to the industry. MRK is cheaper than 85.42% of the companies in the same industry.
MRK's Price/Earnings ratio indicates a valuation a bit cheaper than the S&P500 average which is at 28.68.
MRK is valuated reasonably with a Price/Forward Earnings ratio of 10.26.
87.50% 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 (23.58), we can say MRK is valued rather cheaply.
Compared to the rest of the industry, the Enterprise Value to EBITDA ratio of MRK indicates a rather cheap valuation: MRK is cheaper than 84.90% of the companies listed in the same industry.
Based on the Price/Free Cash Flow ratio, MRK is valued cheaply inside the industry as 86.46% of the companies are valued more expensively.
MRK's low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company.
MRK has an outstanding profitability rating, which may justify a higher PE ratio.
MRK's earnings are expected to grow with 92.55% in the coming years. This may justify a more expensive valuation.

Profitability Assessment of 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's Return On Assets of 10.34% is amongst the best of the industry. MRK outperforms 93.75% of its industry peers.
MRK has a Return On Equity of 27.30%. This is amongst the best in the industry. MRK outperforms 94.79% of its industry peers.
With an excellent Return On Invested Capital value of 19.49%, MRK belongs to the best of the industry, outperforming 95.83% of the companies in the same industry.
The 3 year average ROIC (12.63%) for MRK is below the current ROIC(19.49%), indicating increased profibility in the last year.
Looking at the Profit Margin, with a value of 19.23%, MRK belongs to the top of the industry, outperforming 93.23% of the companies in the same industry.
MRK's Operating Margin of 34.34% is amongst the best of the industry. MRK outperforms 96.35% of its industry peers.
MRK has a better Gross Margin (76.59%) than 83.33% of its industry peers.

Analyzing Health Metrics

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 6 for health provides valuable insights:

MRK has an Altman-Z score of 4.01. This indicates that MRK is financially healthy and has little risk of bankruptcy at the moment.
MRK has a better Altman-Z score (4.01) than 77.08% of its industry peers.
MRK has a debt to FCF ratio of 2.57. This is a good value and a sign of high solvency as MRK would need 2.57 years to pay back of all of its debts.
MRK's Debt to FCF ratio of 2.57 is amongst the best of the industry. MRK outperforms 94.27% of its industry peers.

Deciphering NYSE:MRK's Growth Rating

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:

The Earnings Per Share has grown by an impressive 92.56% over the past year.
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.
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

Keep in mind

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.