MERCK & CO. INC. (MRK) Stock Fundamental Analysis
NYSE:MRK - New York Stock Exchange, Inc. - US58933Y1055 - Common Stock - Currency: USD
We assign a fundamental rating of 7 out of 10 to MRK. MRK was compared to 194 industry peers in the Pharmaceuticals industry. While MRK has a great profitability rating, there are some minor concerns on its financial health. A decent growth rate in combination with a cheap valuation! Better keep an eye on MRK. Finally MRK also has an excellent dividend rating. These ratings would make MRK suitable for value and dividend investing!
1. Profitability
1.1 Basic Checks
MRK had positive earnings in the past year.
MRK had a positive operating cash flow in the past year.
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.
1.2 Ratios
With an excellent Return On Assets value of 10.34%, MRK belongs to the best of the industry, outperforming 94.05% of the companies in the same industry.
Looking at the Return On Equity, with a value of 27.30%, MRK belongs to the top of the industry, outperforming 95.68% of the companies in the same industry.
MRK's Return On Invested Capital of 19.49% is amongst the best of the industry. MRK outperforms 95.68% of its industry peers.
| Industry Rank | Sector 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
1.3 Margins
MRK has a better Profit Margin (19.23%) than 92.43% of its industry peers.
MRK's Profit Margin has been stable in the last couple of years.
MRK has a Operating Margin of 34.34%. This is amongst the best in the industry. MRK outperforms 95.68% of its industry peers.
MRK's Operating Margin has improved in the last couple of years.
MRK has a Gross Margin of 76.59%. This is amongst the best in the industry. MRK outperforms 82.70% of its industry peers.
In the last couple of years the Gross Margin of MRK has grown nicely.
| Industry Rank | Sector 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%
2. Health
2.1 Basic Checks
MRK has a Return on Invested Capital (ROIC), which is well above the Cost of Capital (WACC), which means it is creating value.
There is no outstanding debt for MRK. This means it has a Debt/Equity and Debt/FCF ratio of 0 and it is amongst the best of the sector and industry.
2.2 Solvency
An Altman-Z score of 3.81 indicates that MRK is not in any danger for bankruptcy at the moment.
The Altman-Z score of MRK (3.81) is better than 76.76% 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 92.97% of its industry peers.
A Debt/Equity ratio of 0.79 indicates that MRK is somewhat dependend on debt financing.
With a Debt to Equity ratio value of 0.79, MRK is not doing good in the industry: 70.27% of the companies in the same industry are doing better.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.79 | ||
| Debt/FCF | 2.57 | ||
| Altman-Z | 3.81 |
ROIC/WACC2.06
WACC9.47%
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 79.46% 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 76.22% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.36 | ||
| Quick Ratio | 1.15 |
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.
The Earnings Per Share has been growing by 8.04% on average over the past years. This is quite good.
MRK shows a small growth in Revenue. In the last year, the Revenue has grown by 6.74%.
MRK shows quite a strong growth in Revenue. Measured over the last years, the Revenue has been growing by 10.40% yearly.
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
MRK is expected to show a small growth in Earnings Per Share. In the coming years, the EPS will grow by 6.10% yearly.
The Revenue is expected to grow by 2.92% on average over the next years.
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
When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is decreasing.
The Revenue growth rate is decreasing: in the next years the growth will be less than in the last years.
4. Valuation
4.1 Price/Earnings Ratio
Based on the Price/Earnings ratio of 11.71, the valuation of MRK can be described as reasonable.
MRK's Price/Earnings ratio is rather cheap when compared to the industry. MRK is cheaper than 91.35% of the companies in the same industry.
MRK is valuated cheaply when we compare the Price/Earnings ratio to 29.63, which is the current average of the S&P500 Index.
Based on the Price/Forward Earnings ratio of 9.87, the valuation of MRK can be described as reasonable.
Based on the Price/Forward Earnings ratio, MRK is valued cheaper than 89.73% of the companies in the same industry.
The average S&P500 Price/Forward Earnings ratio is at 22.68. MRK is valued rather cheaply when compared to this.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 11.71 | ||
| Fwd PE | 9.87 |
4.2 Price Multiples
87.03% of the companies in the same industry are more expensive than MRK, based on the Enterprise Value to EBITDA ratio.
89.19% 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 | 15.26 | ||
| EV/EBITDA | 9.45 |
4.3 Compensation for Growth
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 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%
5. Dividend
5.1 Amount
MRK has a Yearly Dividend Yield of 3.84%.
MRK's Dividend Yield is rather good when compared to the industry average which is at 4.35. MRK pays more dividend than 94.59% of the companies in the same industry.
MRK's Dividend Yield is rather good when compared to the S&P500 average which is at 2.29.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 3.84% |
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
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%
89.5
+1.82 (+2.08%)
Chartmill FA Rating
GICS SectorHealth Care
GICS IndustryGroupPharmaceuticals, Biotechnology & Life Sciences
GICS IndustryPharmaceuticals
Earnings (Last)
Earnings (Next)
Inst Owners79.13%
Inst Owner Change1.19%
Ins Owners0.04%
Ins Owner Change10.71%
Market Cap226.40B
Analysts78.75
Price Target128.12 (43.15%)
Short Float %1.17%
Short Ratio2.18
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 3.84% |
Yearly Dividend2.94
Dividend Growth(5Y)8.47%
DP63.72%
Div Incr Years13
Div Non Decr Years33
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)4.07%
Min EPS beat(2)3.35%
Max EPS beat(2)4.78%
EPS beat(4)4
Avg EPS beat(4)36.16%
Min EPS beat(4)3.35%
Max EPS beat(4)127.21%
EPS beat(8)8
Avg EPS beat(8)21.03%
EPS beat(12)12
Avg EPS beat(12)18.06%
EPS beat(16)13
Avg EPS beat(16)12.99%
Revenue beat(2)2
Avg Revenue beat(2)0.46%
Min Revenue beat(2)0.2%
Max Revenue beat(2)0.71%
Revenue beat(4)3
Avg Revenue beat(4)0.9%
Min Revenue beat(4)-0.09%
Max Revenue beat(4)2.78%
Revenue beat(8)7
Avg Revenue beat(8)1.76%
Revenue beat(12)11
Avg Revenue beat(12)2.68%
Revenue beat(16)13
Avg Revenue beat(16)0.5%
PT rev (1m)-2.6%
PT rev (3m)-8.48%
EPS NQ rev (1m)-12.92%
EPS NQ rev (3m)-12.79%
EPS NY rev (1m)-5.31%
EPS NY rev (3m)-4.48%
Revenue NQ rev (1m)-0.15%
Revenue NQ rev (3m)-0.1%
Revenue NY rev (1m)-0.15%
Revenue NY rev (3m)0.18%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 11.71 | ||
| Fwd PE | 9.87 | ||
| P/S | 3.58 | ||
| P/FCF | 15.26 | ||
| P/OCF | 12.4 | ||
| P/B | 5.09 | ||
| P/tB | 39.07 | ||
| EV/EBITDA | 9.45 |
EPS(TTM)7.64
EY8.54%
EPS(NY)9.07
Fwd EY10.14%
FCF(TTM)5.87
FCFY6.55%
OCF(TTM)7.22
OCFY8.07%
SpS24.97
BVpS17.59
TBVpS2.29
PEG (NY)0.63
PEG (5Y)1.46
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 10.34% | ||
| ROE | 27.3% | ||
| ROCE | 24.67% | ||
| ROIC | 19.49% | ||
| ROICexc | 23.37% | ||
| ROICexgc | 49.47% | ||
| OM | 34.34% | ||
| PM (TTM) | 19.23% | ||
| GM | 76.59% | ||
| FCFM | 23.49% |
ROA(3y)N/A
ROA(5y)N/A
ROE(3y)N/A
ROE(5y)N/A
ROIC(3y)N/A
ROIC(5y)N/A
ROICexc(3y)N/A
ROICexc(5y)N/A
ROICexgc(3y)N/A
ROICexgc(5y)N/A
ROCE(3y)N/A
ROCE(5y)N/A
ROICexcg growth 3YN/A
ROICexcg growth 5YN/A
ROICexc growth 3YN/A
ROICexc growth 5YN/A
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%
F-Score8
Asset Turnover0.54
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.79 | ||
| Debt/FCF | 2.57 | ||
| Debt/EBITDA | 1.35 | ||
| Cap/Depr | 80.26% | ||
| Cap/Sales | 5.42% | ||
| Interest Coverage | 17.44 | ||
| Cash Conversion | 70.35% | ||
| Profit Quality | 122.16% | ||
| Current Ratio | 1.36 | ||
| Quick Ratio | 1.15 | ||
| Altman-Z | 3.81 |
F-Score8
WACC9.47%
ROIC/WACC2.06
Cap/Depr(3y)N/A
Cap/Depr(5y)N/A
Cap/Sales(3y)N/A
Cap/Sales(5y)N/A
Profit Quality(3y)N/A
Profit Quality(5y)N/A
High Growth Momentum
Growth
EPS 1Y (TTM)409.33%
EPS 3Y6.87%
EPS 5Y8.04%
EPS Q2Q%5633.33%
EPS Next Y18.73%
EPS Next 2Y14.02%
EPS Next 3Y12.89%
EPS Next 5Y6.1%
Revenue 1Y (TTM)6.74%
Revenue growth 3Y9.63%
Revenue growth 5Y10.4%
Sales Q2Q%6.79%
Revenue Next Year4.95%
Revenue Next 2Y5.46%
Revenue Next 3Y5.64%
Revenue Next 5Y2.92%
EBIT growth 1Y4.37%
EBIT growth 3Y14.48%
EBIT growth 5Y18.33%
EBIT Next Year32.74%
EBIT Next 3Y17.02%
EBIT Next 5Y7.72%
FCF growth 1Y12.71%
FCF growth 3YN/A
FCF growth 5YN/A
OCF growth 1Y6.25%
OCF growth 3YN/A
OCF growth 5YN/A