New York Stock Exchange, Inc. / Health Care / Pharmaceuticals
Technical Analysis
Fundamental Analysis
Analyst Ratings, Profile & Chart
Fundamental Rating
We assign a fundamental rating of 7 out of 10 to MRK. MRK was compared to 197 industry peers in the Pharmaceuticals industry. Both the health and profitability get an excellent rating, making MRK a very profitable company, without any liquidiy or solvency issues. MRK may be a bit undervalued, certainly considering the very reasonable score on growth MRK also has an excellent dividend rating. This makes MRK very considerable for value and dividend and quality investing!
1. Profitability
1.1 Basic Checks
MRK had positive earnings in the past year.
In the past year MRK had a positive cash flow from operations.
MRK had positive earnings in each of the past 5 years.
MRK had a positive operating cash flow in each of the past 5 years.
1.2 Ratios
MRK's Return On Assets of 14.62% is amongst the best of the industry. MRK outperforms 96.97% of its industry peers.
MRK has a better Return On Equity (36.96%) than 96.97% of its industry peers.
With an excellent Return On Invested Capital value of 19.77%, MRK belongs to the best of the industry, outperforming 94.44% of the companies in the same industry.
Measured over the past 3 years, the Average Return On Invested Capital for MRK is significantly below the industry average of 40.40%.
Industry Rank
Sector Rank
ROA
14.62%
ROE
36.96%
ROIC
19.77%
ROA(3y)9.42%
ROA(5y)9.66%
ROE(3y)23.17%
ROE(5y)26.32%
ROIC(3y)20.13%
ROIC(5y)17.77%
1.3 Margins
MRK has a better Profit Margin (26.68%) than 96.46% of its industry peers.
In the last couple of years the Profit Margin of MRK has remained more or less at the same level.
With an excellent Operating Margin value of 34.59%, MRK belongs to the best of the industry, outperforming 95.96% of the companies in the same industry.
MRK's Operating Margin has improved in the last couple of years.
MRK has a better Gross Margin (78.19%) than 84.34% of its industry peers.
MRK's Gross Margin has improved in the last couple of years.
The Return on Invested Capital (ROIC) is well above the Cost of Capital (WACC), so MRK is creating value.
MRK has about the same amout of shares outstanding than it did 1 year ago.
Compared to 5 years ago, MRK has less shares outstanding
MRK has a better debt/assets ratio than last year.
2.2 Solvency
MRK has an Altman-Z score of 3.70. This indicates that MRK is financially healthy and has little risk of bankruptcy at the moment.
MRK has a better Altman-Z score (3.70) than 79.29% of its industry peers.
The Debt to FCF ratio of MRK is 2.05, which is a good value as it means it would take MRK, 2.05 years of fcf income to pay off all of its debts.
MRK's Debt to FCF ratio of 2.05 is amongst the best of the industry. MRK outperforms 93.43% of its industry peers.
MRK has a Debt/Equity ratio of 0.74. This is a neutral value indicating MRK is somewhat dependend on debt financing.
MRK's Debt to Equity ratio of 0.74 is on the low side compared to the rest of the industry. MRK is outperformed by 67.17% of its industry peers.
Although MRK does not score too well on debt/equity it has very limited outstanding debt, which is well covered by the FCF. We will not put too much weight on the debt/equity number as it may be because of low equity, which could be a consequence of a share buyback program for instance. This needs to be investigated.
Industry Rank
Sector Rank
Debt/Equity
0.74
Debt/FCF
2.05
Altman-Z
3.7
ROIC/WACC2.13
WACC9.27%
2.3 Liquidity
A Current Ratio of 1.36 indicates that MRK should not have too much problems paying its short term obligations.
MRK has a worse Current ratio (1.36) than 76.26% of its industry peers.
MRK has a Quick Ratio of 1.15. This is a normal value and indicates that MRK is financially healthy and should not expect problems in meeting its short term obligations.
MRK's Quick ratio of 1.15 is on the low side compared to the rest of the industry. MRK is outperformed by 72.22% 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.
MRK is valuated reasonably with a Price/Earnings ratio of 10.21.
MRK's Price/Earnings ratio is rather cheap when compared to the industry. MRK is cheaper than 90.40% of the companies in the same industry.
When comparing the Price/Earnings ratio of MRK to the average of the S&P500 Index (28.29), we can say MRK is valued rather cheaply.
A Price/Forward Earnings ratio of 8.61 indicates a reasonable valuation of MRK.
Compared to the rest of the industry, the Price/Forward Earnings ratio of MRK indicates a rather cheap valuation: MRK is cheaper than 89.90% of the companies listed in the same industry.
Compared to an average S&P500 Price/Forward Earnings ratio of 21.08, MRK is valued rather cheaply.
Industry Rank
Sector Rank
PE
10.21
Fwd PE
8.61
4.2 Price Multiples
MRK's Enterprise Value to EBITDA ratio is rather cheap when compared to the industry. MRK is cheaper than 86.36% of the companies in the same industry.
89.90% of the companies in the same industry are more expensive than MRK, based on the Price/Free Cash Flow ratio.
Industry Rank
Sector Rank
P/FCF
10.85
EV/EBITDA
8.21
4.3 Compensation for Growth
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 13.30% in the coming years.
With a Yearly Dividend Yield of 4.15%, MRK is a good candidate for dividend investing.
In the last 3 months the price of MRK has falen by -20.34%. A price decline artificially increases the dividend yield. It may be a sign investors do not expect the dividend to last.
MRK's Dividend Yield is rather good when compared to the industry average which is at 4.50. MRK pays more dividend than 94.44% of the companies in the same industry.
Compared to an average S&P500 Dividend Yield of 2.52, MRK pays a better dividend.
Industry Rank
Sector Rank
Dividend Yield
4.15%
5.2 History
On average, the dividend of MRK grows each year by 6.90%, which is quite nice.
MRK has paid a dividend for at least 10 years, which is a reliable track record.
MRK has not decreased its dividend for at least 10 years, so it has a reliable track record of non decreasing dividend.
Dividend Growth(5Y)6.9%
Div Incr Years13
Div Non Decr Years33
5.3 Sustainability
45.80% of the earnings are spent on dividend by MRK. This is a bit on the high side, but may be sustainable.
The dividend of MRK is growing, but the earnings are growing slower. This means the dividend growth is not sustainable.