Decent Value Stocks. Analyze the stocks with a good fundamental valuation, while still showing decent profitability, health and growth.


MERCK & CO. INC.

New York Stock Exchange, Inc. / Health Care / Pharmaceuticals

Fundamental Rating

7

We assign a fundamental rating of 7 out of 10 to MRK. MRK was compared to 194 industry peers in the Pharmaceuticals industry. MRK has an excellent profitability rating, but there are some minor concerns on its financial health. MRK is valued quite cheap, while showing a decent growth score. This is a good combination! Finally MRK also has an excellent dividend rating. With these ratings, MRK could be worth investigating further for value and dividend investing!.


Dividend Valuation Growth Profitability Health

8

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.
MRK had positive earnings in each of the past 5 years.
Of the past 5 years MRK 4 years had a positive operating cash flow.
MRK Yearly Net Income VS EBIT VS OCF VS FCFMRK Yearly Net Income VS EBIT VS OCF VS FCFYearly Net Income VS EBIT VS OCF VS FCF 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 5B 10B 15B 20B

1.2 Ratios

Looking at the Return On Assets, with a value of 10.34%, MRK belongs to the top of the industry, outperforming 94.05% of the companies in the same industry.
MRK has a Return On Equity of 27.30%. This is amongst the best in the industry. MRK outperforms 95.68% of its industry peers.
With an excellent Return On Invested Capital value of 19.49%, MRK belongs to the best of the industry, outperforming 95.68% of the companies in the same industry.
Industry RankSector Rank
ROA 10.34%
ROE 27.3%
ROIC 19.49%
ROA(3y)N/A
ROA(5y)N/A
ROE(3y)N/A
ROE(5y)N/A
ROIC(3y)N/A
ROIC(5y)N/A
MRK Yearly ROA, ROE, ROICMRK Yearly ROA, ROE, ROICYearly ROA, ROE, ROIC 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 10 20 30

1.3 Margins

Looking at the Profit Margin, with a value of 19.23%, MRK belongs to the top of the industry, outperforming 92.43% of the companies in the same industry.
MRK's Profit Margin has been stable in the last couple of years.
With an excellent Operating Margin value of 34.34%, MRK belongs to the best of the industry, outperforming 95.68% of the companies in the same industry.
In the last couple of years the Operating Margin of MRK has grown nicely.
MRK has a Gross Margin of 76.59%. This is amongst the best in the industry. MRK outperforms 82.70% of its industry peers.
MRK's Gross Margin has improved in the last couple of years.
Industry RankSector Rank
OM 34.34%
PM (TTM) 19.23%
GM 76.59%
OM growth 3Y4.43%
OM growth 5Y7.18%
PM growth 3Y-0.15%
PM growth 5Y1.18%
GM growth 3Y3.55%
GM growth 5Y2.42%
MRK Yearly Profit, Operating, Gross MarginsMRK Yearly Profit, Operating, Gross MarginsYearly Profit, Operating, Gross Margins 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 20 40 60 80

5

2. Health

2.1 Basic Checks

With a Return on Invested Capital (ROIC) well above the Cost of Capital (WACC), MRK is creating value.
MRK has no outstanding debt. Therefor its Debt/Equity and Debt/FCF ratios are 0 and belong to the best of the industry.
MRK Yearly Shares OutstandingMRK Yearly Shares OutstandingYearly Shares Outstanding 2015 2016 2017 2018 2019 2020 2021 2022 2023 500M 1B 1.5B 2B 2.5B
MRK Yearly Total Debt VS Total AssetsMRK Yearly Total Debt VS Total AssetsYearly Total Debt VS Total Assets 2015 2016 2017 2018 2019 2020 2021 2022 2023 20B 40B 60B 80B 100B

2.2 Solvency

An Altman-Z score of 3.81 indicates that MRK is not in any danger for bankruptcy at the moment.
With a decent Altman-Z score value of 3.81, MRK is doing good in the industry, outperforming 76.76% of the companies in the same industry.
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 92.97% of its industry peers.
MRK has a Debt/Equity ratio of 0.79. This is a neutral value indicating MRK is somewhat dependend on debt financing.
MRK has a worse Debt to Equity ratio (0.79) than 70.27% of its industry peers.
Industry RankSector Rank
Debt/Equity 0.79
Debt/FCF 2.57
Altman-Z 3.81
ROIC/WACC2.07
WACC9.4%
MRK Yearly LT Debt VS Equity VS FCFMRK Yearly LT Debt VS Equity VS FCFYearly LT Debt VS Equity VS FCF 2015 2016 2017 2018 2019 2020 2021 2022 2023 10B 20B 30B 40B

2.3 Liquidity

MRK has a Current Ratio of 1.36. This is a normal value and indicates that MRK is financially healthy and should not expect problems in meeting its short term obligations.
With a Current ratio value of 1.36, MRK is not doing good in the industry: 79.46% of the companies in the same industry are doing better.
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.
Looking at the Quick ratio, with a value of 1.15, MRK is doing worse than 76.22% of the companies in the same industry.
Industry RankSector Rank
Current Ratio 1.36
Quick Ratio 1.15
MRK Yearly Current Assets VS Current LiabilitesMRK Yearly Current Assets VS Current LiabilitesYearly Current Assets VS Current Liabilites 2015 2016 2017 2018 2019 2020 2021 2022 2023 10B 20B 30B

5

3. Growth

3.1 Past

MRK shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 409.33%, which is quite impressive.
Measured over the past years, MRK shows a quite strong growth in Earnings Per Share. The EPS has been growing by 8.04% on average per year.
Looking at the last year, MRK shows a small growth in Revenue. The Revenue has grown by 6.74% in the last year.
The Revenue has been growing by 10.40% on average over the past years. This is quite good.
EPS 1Y (TTM)409.33%
EPS 3Y6.87%
EPS 5Y8.04%
EPS Q2Q%5633.33%
Revenue 1Y (TTM)6.74%
Revenue growth 3Y9.63%
Revenue growth 5Y10.4%
Sales Q2Q%6.79%

3.2 Future

The Earnings Per Share is expected to grow by 6.10% on average over the next years.
Based on estimates for the next years, MRK will show a small growth in Revenue. The Revenue will grow by 2.92% on average per year.
EPS Next Y18.73%
EPS Next 2Y14.02%
EPS Next 3Y12.89%
EPS Next 5Y6.1%
Revenue Next Year4.95%
Revenue Next 2Y5.46%
Revenue Next 3Y5.64%
Revenue Next 5Y2.92%

3.3 Evolution

The EPS growth rate is decreasing: in the next years the growth will be less than in the last years.
When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is decreasing.
MRK Yearly Revenue VS EstimatesMRK Yearly Revenue VS EstimatesYearly Revenue VS Estimates 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 20B 40B 60B
MRK Yearly EPS VS EstimatesMRK Yearly EPS VS EstimatesYearly EPS VS Estimates 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2 4 6 8 10

9

4. Valuation

4.1 Price/Earnings Ratio

The Price/Earnings ratio is 11.71, which indicates a very decent valuation of MRK.
Based on the Price/Earnings ratio, MRK is valued cheaper than 91.35% of the companies in the same industry.
When comparing the Price/Earnings ratio of MRK to the average of the S&P500 Index (29.63), we can say MRK is valued rather cheaply.
The Price/Forward Earnings ratio is 9.87, which indicates a very decent valuation of MRK.
MRK's Price/Forward Earnings ratio is rather cheap when compared to the industry. MRK is cheaper than 89.73% of the companies in the same industry.
When comparing the Price/Forward Earnings ratio of MRK to the average of the S&P500 Index (22.68), we can say MRK is valued rather cheaply.
Industry RankSector Rank
PE 11.71
Fwd PE 9.87
MRK Price Earnings VS Forward Price EarningsMRK Price Earnings VS Forward Price Earnings ChartPrice Earnings - Forward Price Earnings PE FPE 10 20 30

4.2 Price Multiples

Based on the Enterprise Value to EBITDA ratio, MRK is valued cheaply inside the industry as 87.03% of the companies are valued more expensively.
89.19% of the companies in the same industry are more expensive than MRK, based on the Price/Free Cash Flow ratio.
Industry RankSector Rank
P/FCF 15.26
EV/EBITDA 9.45
MRK Per share dataMRK EPS, Sales, OCF, FCF, BookValue per sharePer Share Data Per Share 5 10 15 20

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.
MRK's earnings are expected to grow with 12.89% in the coming years. This may justify a more expensive valuation.
PEG (NY)0.63
PEG (5Y)1.46
EPS Next 2Y14.02%
EPS Next 3Y12.89%

7

5. Dividend

5.1 Amount

MRK has a Yearly Dividend Yield of 3.70%. Purely for dividend investing, there may be better candidates out there.
Compared to an average industry Dividend Yield of 4.35, MRK pays a better dividend. On top of this MRK pays more dividend than 94.59% of the companies listed in the same industry.
MRK's Dividend Yield is rather good when compared to the S&P500 average which is at 2.29.
Industry RankSector Rank
Dividend Yield 3.7%

5.2 History

On average, the dividend of MRK grows each year by 8.47%, which is quite nice.
MRK has paid a dividend for at least 10 years, which is a reliable track record.
MRK has not decreased their dividend for at least 10 years, which is a reliable track record.
Dividend Growth(5Y)8.47%
Div Incr Years13
Div Non Decr Years33
MRK Yearly Dividends per shareMRK Yearly Dividends per shareYearly Dividends per share 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 1 2 3

5.3 Sustainability

MRK pays out 63.72% of its income as dividend. This is not a sustainable payout ratio.
The dividend of MRK is growing, but the earnings are growing slower. This means the dividend growth is not sustainable.
DP63.72%
EPS Next 2Y14.02%
EPS Next 3Y12.89%
MRK Yearly Income VS Free CF VS DividendMRK Yearly Income VS Free CF VS DividendYearly Income VS Free CF VS Dividend 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 5B 10B 15B
MRK Dividend Payout.MRK Dividend Payout, showing the Payout Ratio.MRK Dividend Payout.PayoutRetained Earnings