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 8 out of 10 to MRK. MRK was compared to 195 industry peers in the Pharmaceuticals industry. MRK gets an excellent profitability rating and is at the same time showing great financial health properties. MRK scores decently on growth, while it is valued quite cheap. This could make an interesting combination. 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
MRK had positive earnings in the past year.
MRK had a positive operating cash flow in the past year.
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
MRK has a better Return On Assets (15.14%) than 96.92% of its industry peers.
MRK has a better Return On Equity (36.07%) than 96.92% of its industry peers.
With an excellent Return On Invested Capital value of 19.00%, MRK belongs to the best of the industry, outperforming 94.87% 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 above the industry average of 14.87%.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 15.14% | ||
| ROE | 36.07% | ||
| ROIC | 19% |
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 (27.27%) than 96.92% of its industry peers.
In the last couple of years the Profit Margin of MRK has remained more or less at the same level.
Looking at the Operating Margin, with a value of 33.84%, MRK belongs to the top of the industry, outperforming 95.90% of the companies in the same industry.
In the last couple of years the Operating Margin of MRK has grown nicely.
With an excellent Gross Margin value of 78.17%, MRK belongs to the best of the industry, outperforming 86.15% of the companies in the same industry.
MRK's Gross Margin has improved in the last couple of years.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 33.84% | ||
| PM (TTM) | 27.27% | ||
| GM | 78.17% |
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.
Compared to 1 year ago, MRK has about the same amount of shares outstanding.
The number of shares outstanding for MRK has been reduced compared to 5 years ago.
The debt/assets ratio for MRK has been reduced compared to a year ago.
2.2 Solvency
MRK has an Altman-Z score of 3.91. This indicates that MRK is financially healthy and has little risk of bankruptcy at the moment.
MRK's Altman-Z score of 3.91 is fine compared to the rest of the industry. MRK outperforms 78.46% of its industry peers.
MRK has a debt to FCF ratio of 2.04. This is a good value and a sign of high solvency as MRK would need 2.04 years to pay back of all of its debts.
MRK has a Debt to FCF ratio of 2.04. This is amongst the best in the industry. MRK outperforms 94.36% of its industry peers.
MRK has a Debt/Equity ratio of 0.69. This is a neutral value indicating MRK is somewhat dependend on debt financing.
Looking at the Debt to Equity ratio, with a value of 0.69, MRK is doing worse than 66.67% of the companies in the same industry.
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 | 0.69 | ||
| Debt/FCF | 2.04 | ||
| Altman-Z | 3.91 |
ROIC/WACC2.03
WACC9.35%
2.3 Liquidity
A Current Ratio of 1.41 indicates that MRK should not have too much problems paying its short term obligations.
With a Current ratio value of 1.41, MRK is not doing good in the industry: 70.26% of the companies in the same industry are doing better.
MRK has a Quick Ratio of 1.16. 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 Quick ratio of 1.16. This is in the lower half of the industry: MRK underperforms 70.77% 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.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.41 | ||
| Quick Ratio | 1.16 |
3. Growth
3.1 Past
MRK shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 258.99%, which is quite impressive.
The Earnings Per Share has been growing by 8.04% on average over the past years. This is quite good.
Looking at the last year, MRK shows a small growth in Revenue. The Revenue has grown by 4.10% 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)258.99%
EPS 3Y6.87%
EPS 5Y8.04%
EPS Q2Q%7.25%
Revenue 1Y (TTM)4.1%
Revenue growth 3Y9.63%
Revenue growth 5Y10.4%
Sales Q2Q%-1.56%
3.2 Future
The Earnings Per Share is expected to grow by 5.96% on average over the next years.
MRK is expected to show a small growth in Revenue. In the coming years, the Revenue will grow by 2.20% yearly.
EPS Next Y17.71%
EPS Next 2Y13.67%
EPS Next 3Y12.76%
EPS Next 5Y5.96%
Revenue Next Year1.67%
Revenue Next 2Y3.7%
Revenue Next 3Y4.26%
Revenue Next 5Y2.2%
3.3 Evolution
The EPS growth rate is decreasing: in the next years the growth will be less than in the last years.
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 10.39, the valuation of MRK can be described as reasonable.
Compared to the rest of the industry, the Price/Earnings ratio of MRK indicates a rather cheap valuation: MRK is cheaper than 90.77% of the companies listed in the same industry.
MRK's Price/Earnings ratio indicates a rather cheap valuation when compared to the S&P500 average which is at 27.45.
MRK is valuated reasonably with a Price/Forward Earnings ratio of 8.20.
Based on the Price/Forward Earnings ratio, MRK is valued cheaply inside the industry as 86.15% of the companies are valued more expensively.
When comparing the Price/Forward Earnings ratio of MRK to the average of the S&P500 Index (21.90), we can say MRK is valued rather cheaply.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 10.39 | ||
| Fwd PE | 8.2 |
4.2 Price Multiples
87.69% of the companies in the same industry are more expensive than MRK, based on the Enterprise Value to EBITDA ratio.
Based on the Price/Free Cash Flow ratio, MRK is valued cheaper than 89.23% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 11.93 | ||
| EV/EBITDA | 8.7 |
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.
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 12.76% in the coming years.
PEG (NY)0.59
PEG (5Y)1.29
EPS Next 2Y13.67%
EPS Next 3Y12.76%
5. Dividend
5.1 Amount
With a Yearly Dividend Yield of 4.11%, MRK is a good candidate for dividend investing.
MRK's Dividend Yield is rather good when compared to the industry average which is at 4.12. MRK pays more dividend than 94.87% of the companies in the same industry.
MRK's Dividend Yield is rather good when compared to the S&P500 average which is at 2.42.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 4.11% |
5.2 History
The dividend of MRK is nicely growing with an annual growth rate of 6.90%!
MRK has been paying a dividend for at least 10 years, so it has 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 Years14
Div Non Decr Years34
5.3 Sustainability
MRK pays out 45.54% 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.
DP45.54%
EPS Next 2Y13.67%
EPS Next 3Y12.76%
80.93
-1.46 (-1.77%)
Chartmill FA Rating
GICS SectorHealth Care
GICS IndustryGroupPharmaceuticals, Biotechnology & Life Sciences
GICS IndustryPharmaceuticals
Earnings (Last)
Earnings (Next)
Inst Owners80.57%
Inst Owner Change0.18%
Ins Owners0.05%
Ins Owner Change10.77%
Market Cap203.22B
Analysts76.88
Price Target104.83 (29.53%)
Short Float %1.43%
Short Ratio2.19
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 4.11% |
Yearly Dividend3.1
Dividend Growth(5Y)6.9%
DP45.54%
Div Incr Years14
Div Non Decr Years34
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)4.19%
Min EPS beat(2)2.93%
Max EPS beat(2)5.44%
EPS beat(4)4
Avg EPS beat(4)4.13%
Min EPS beat(4)2.93%
Max EPS beat(4)5.44%
EPS beat(8)8
Avg EPS beat(8)20.93%
EPS beat(12)12
Avg EPS beat(12)16.06%
EPS beat(16)15
Avg EPS beat(16)14.76%
Revenue beat(2)1
Avg Revenue beat(2)0.18%
Min Revenue beat(2)-0.1%
Max Revenue beat(2)0.45%
Revenue beat(4)3
Avg Revenue beat(4)0.32%
Min Revenue beat(4)-0.1%
Max Revenue beat(4)0.71%
Revenue beat(8)6
Avg Revenue beat(8)1.27%
Revenue beat(12)10
Avg Revenue beat(12)1.96%
Revenue beat(16)14
Avg Revenue beat(16)2.49%
PT rev (1m)-2.94%
PT rev (3m)-10.49%
EPS NQ rev (1m)0.8%
EPS NQ rev (3m)-7.26%
EPS NY rev (1m)-0.02%
EPS NY rev (3m)-0.92%
Revenue NQ rev (1m)-0.07%
Revenue NQ rev (3m)-1.75%
Revenue NY rev (1m)0%
Revenue NY rev (3m)-0.16%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 10.39 | ||
| Fwd PE | 8.2 | ||
| P/S | 3.18 | ||
| P/FCF | 11.93 | ||
| P/OCF | 9.73 | ||
| P/B | 4.2 | ||
| P/tB | 18.66 | ||
| EV/EBITDA | 8.7 |
EPS(TTM)7.79
EY9.63%
EPS(NY)9.87
Fwd EY12.2%
FCF(TTM)6.79
FCFY8.38%
OCF(TTM)8.31
OCFY10.27%
SpS25.46
BVpS19.25
TBVpS4.34
PEG (NY)0.59
PEG (5Y)1.29
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 15.14% | ||
| ROE | 36.07% | ||
| ROCE | 24.05% | ||
| ROIC | 19% | ||
| ROICexc | 21.17% | ||
| ROICexgc | 39.48% | ||
| OM | 33.84% | ||
| PM (TTM) | 27.27% | ||
| GM | 78.17% | ||
| FCFM | 26.66% |
ROA(3y)9.42%
ROA(5y)9.66%
ROE(3y)23.17%
ROE(5y)26.32%
ROIC(3y)20.13%
ROIC(5y)17.77%
ROICexc(3y)23.21%
ROICexc(5y)20.34%
ROICexgc(3y)50.41%
ROICexgc(5y)46.67%
ROCE(3y)25.47%
ROCE(5y)22.5%
ROICexcg growth 3Y6.23%
ROICexcg growth 5Y2.59%
ROICexc growth 3Y13.83%
ROICexc growth 5Y9.86%
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 Turnover0.56
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.69 | ||
| Debt/FCF | 2.04 | ||
| Debt/EBITDA | 1.28 | ||
| Cap/Depr | 83.2% | ||
| Cap/Sales | 6.01% | ||
| Interest Coverage | 16.44 | ||
| Cash Conversion | 79.55% | ||
| Profit Quality | 97.73% | ||
| Current Ratio | 1.41 | ||
| Quick Ratio | 1.16 | ||
| Altman-Z | 3.91 |
F-Score8
WACC9.35%
ROIC/WACC2.03
Cap/Depr(3y)95.66%
Cap/Depr(5y)110.48%
Cap/Sales(3y)6.36%
Cap/Sales(5y)7.78%
Profit Quality(3y)903.98%
Profit Quality(5y)573.68%
High Growth Momentum
Growth
EPS 1Y (TTM)258.99%
EPS 3Y6.87%
EPS 5Y8.04%
EPS Q2Q%7.25%
EPS Next Y17.71%
EPS Next 2Y13.67%
EPS Next 3Y12.76%
EPS Next 5Y5.96%
Revenue 1Y (TTM)4.1%
Revenue growth 3Y9.63%
Revenue growth 5Y10.4%
Sales Q2Q%-1.56%
Revenue Next Year1.67%
Revenue Next 2Y3.7%
Revenue Next 3Y4.26%
Revenue Next 5Y2.2%
EBIT growth 1Y-3.79%
EBIT growth 3Y14.48%
EBIT growth 5Y18.33%
EBIT Next Year30.08%
EBIT Next 3Y15.02%
EBIT Next 5Y9.31%
FCF growth 1Y51.3%
FCF growth 3Y23.27%
FCF growth 5Y12.67%
OCF growth 1Y33.21%
OCF growth 3Y15.02%
OCF growth 5Y9.82%