New York Stock Exchange, Inc. / Health Care / Pharmaceuticals
Technical Analysis
Fundamental Analysis
Analyst Ratings, Profile & Chart
Fundamental Rating
MRK gets a fundamental rating of 7 out of 10. The analysis compared the fundamentals against 198 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 Finally MRK also has an excellent dividend rating. These ratings would make MRK suitable for value and dividend and quality investing!
1. Profitability
1.1 Basic Checks
In the past year MRK was profitable.
In the past year MRK had a positive cash flow from operations.
In the past 5 years MRK has always been profitable.
Each year in the past 5 years MRK had a positive operating cash flow.
1.2 Ratios
The Return On Assets of MRK (14.62%) is better than 96.97% of its industry peers.
MRK has a better Return On Equity (36.96%) than 96.97% of its industry peers.
Looking at the Return On Invested Capital, with a value of 19.77%, MRK belongs to the top of the industry, outperforming 94.44% of the companies in the same industry.
MRK had an Average Return On Invested Capital over the past 3 years of 20.13%. This is significantly below the industry average of 41.77%.
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
The Profit Margin of MRK (26.68%) is better than 96.46% of its industry peers.
MRK's Profit Margin has been stable in the last couple of years.
Looking at the Operating Margin, with a value of 34.59%, MRK belongs to the top of the industry, outperforming 95.96% of the companies in the same industry.
In the last couple of years the Operating Margin of MRK has grown nicely.
Looking at the Gross Margin, with a value of 78.19%, MRK belongs to the top of the industry, outperforming 84.34% of the companies in the same industry.
In the last couple of years the Gross Margin of MRK has grown nicely.
The Return on Invested Capital (ROIC) is well above the Cost of Capital (WACC), so MRK is creating value.
The number of shares outstanding for MRK remains at a similar level compared to 1 year ago.
Compared to 5 years ago, MRK has less shares outstanding
Compared to 1 year ago, MRK has an improved debt to assets ratio.
2.2 Solvency
MRK has an Altman-Z score of 3.69. This indicates that MRK is financially healthy and has little risk of bankruptcy at the moment.
MRK has a Altman-Z score of 3.69. This is in the better half of the industry: MRK outperforms 79.80% 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 has a Debt to FCF ratio of 2.05. This is amongst the best in 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.
The Debt to Equity ratio of MRK (0.74) is worse than 66.67% 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
3.69
ROIC/WACC2.16
WACC9.17%
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 has a worse Quick ratio (1.15) than 72.22% of its industry peers.
MRK does not score too well on the current and quick ratio evaluation. However, as it has excellent solvency and profitability, these ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.
The Price/Earnings ratio is 10.19, which indicates a very decent valuation of MRK.
Compared to the rest of the industry, the Price/Earnings ratio of MRK indicates a rather cheap valuation: MRK is cheaper than 90.40% of the companies listed in the same industry.
MRK is valuated cheaply when we compare the Price/Earnings ratio to 27.63, which is the current average of the S&P500 Index.
MRK is valuated reasonably with a Price/Forward Earnings ratio of 8.59.
Compared to the rest of the industry, the Price/Forward Earnings ratio of MRK indicates a rather cheap valuation: MRK is cheaper than 90.40% of the companies listed in the same industry.
Compared to an average S&P500 Price/Forward Earnings ratio of 20.85, MRK is valued rather cheaply.
Industry Rank
Sector Rank
PE
10.19
Fwd PE
8.59
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.
Based on the Price/Free Cash Flow ratio, MRK is valued cheaper than 89.90% of the companies in the same industry.
Industry Rank
Sector Rank
P/FCF
10.83
EV/EBITDA
8.2
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.
MRK has a Yearly Dividend Yield of 4.15%, which is a nice return.
MRK's Dividend Yield is rather good when compared to the industry average which is at 4.72. MRK pays more dividend than 94.44% of the companies in the same industry.
Compared to an average S&P500 Dividend Yield of 2.51, 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
MRK pays out 45.80% of its income as dividend. 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.