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

Last update: Jan 23, 2025

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.

A Closer Look at Valuation for NYSE:MRK

ChartMill assigns a Valuation Rating to each stock, ranging from 0 to 10. This rating is calculated by analyzing different valuation elements, such as price to earnings and free cash flow, both in absolute terms and relative to the market and industry. In the case of NYSE:MRK, the assigned 9 reflects its valuation:

Based on the Price/Earnings ratio, MRK is valued cheaply inside the industry as 87.10% of the companies are valued more expensively.
The average S&P500 Price/Earnings ratio is at 28.19. MRK is valued slightly cheaper when compared to this.
A Price/Forward Earnings ratio of 9.99 indicates a reasonable valuation of MRK.
MRK's Price/Forward Earnings ratio is rather cheap when compared to the industry. MRK is cheaper than 89.25% of the companies in the same industry.
Compared to an average S&P500 Price/Forward Earnings ratio of 24.37, MRK is valued rather cheaply.
MRK's Enterprise Value to EBITDA ratio is rather cheap when compared to the industry. MRK is cheaper than 84.95% of the companies in the same industry.
MRK's Price/Free Cash Flow ratio is rather cheap when compared to the industry. MRK is cheaper than 87.10% of the companies in the same industry.
MRK's 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 92.36% in the coming years. This may justify a more expensive valuation.

Analyzing Profitability Metrics

ChartMill utilizes a Profitability Rating to assess stocks, scoring them on a scale of 0 to 10. This rating takes into account a variety of profitability ratios and margins, both in absolute terms and in comparison to industry peers. NYSE:MRK has earned a 8 out of 10:

With an excellent Return On Assets value of 10.34%, MRK belongs to the best of the industry, outperforming 94.09% of the companies in the same industry.
MRK's Return On Equity of 27.30% is amongst the best of the industry. MRK outperforms 95.16% of its industry peers.
The Return On Invested Capital of MRK (19.49%) is better than 95.70% of its industry peers.
The 3 year average ROIC (12.63%) for MRK is below the current ROIC(19.49%), indicating increased profibility in the last year.
With an excellent Profit Margin value of 19.23%, MRK belongs to the best of the industry, outperforming 92.47% of the companies in the same industry.
With an excellent Operating Margin value of 34.34%, MRK belongs to the best of the industry, outperforming 95.70% of the companies in the same industry.
MRK has a Gross Margin of 76.59%. This is amongst the best in the industry. MRK outperforms 82.80% of its industry peers.

Looking at the Health

ChartMill assigns a proprietary Health Rating to each stock. The score is computed by evaluating various liquidity and solvency ratios and ranges from 0 to 10. NYSE:MRK was assigned a score of 6 for health:

An Altman-Z score of 3.98 indicates that MRK is not in any danger for bankruptcy at the moment.
The Altman-Z score of MRK (3.98) is better than 76.88% 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 93.55% of its industry peers.

A Closer Look at Growth for NYSE:MRK

ChartMill assigns a Growth Rating to each stock, ranging from 0 to 10. This rating is determined by analyzing different growth elements, including EPS and revenue growth, spanning both historical and future figures. In the case of NYSE:MRK, the assigned 5 reflects its growth potential:

MRK shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 92.56%, 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 50.50% 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.

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

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

Keep in mind

Important Note: The content of this article is not intended as trading advice. It is essential to perform your own analysis and exercise caution when making trading decisions. The article presents observations created by automated analysis but does not guarantee any trading or investment outcomes. Always trade responsibly and make independent judgments.