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 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. A decent growth rate in combination with a cheap valuation! Better keep an eye on MRK. 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.
Each year in the past 5 years MRK has been profitable.
MRK had a positive operating cash flow in each of the past 5 years.
1.2 Ratios
With an excellent Return On Assets value of 14.62%, MRK belongs to the best of the industry, outperforming 96.95% of the companies in the same industry.
With an excellent Return On Equity value of 36.96%, MRK belongs to the best of the industry, outperforming 96.95% of the companies in the same industry.
Looking at the Return On Invested Capital, with a value of 19.77%, MRK belongs to the top of the industry, outperforming 94.42% 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's Profit Margin of 26.68% is amongst the best of the industry. MRK outperforms 96.45% of its industry peers.
In the last couple of years the Profit Margin of MRK has remained more or less at the same level.
The Operating Margin of MRK (34.59%) is better than 95.94% of its industry peers.
In the last couple of years the Operating Margin of MRK has grown nicely.
MRK has a better Gross Margin (78.19%) than 84.77% of its industry peers.
MRK's Gross Margin has improved in the last couple of years.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 34.59% | ||
| PM (TTM) | 26.68% | ||
| GM | 78.19% |
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
With a Return on Invested Capital (ROIC) well above the Cost of Capital (WACC), MRK 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.
Compared to 1 year ago, MRK has an improved debt to assets ratio.
2.2 Solvency
An Altman-Z score of 3.70 indicates that MRK is not in any danger for bankruptcy at the moment.
MRK has a Altman-Z score of 3.70. This is in the better half of the industry: MRK outperforms 79.19% 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.
The Debt to FCF ratio of MRK (2.05) is better than 93.40% of its industry peers.
A Debt/Equity ratio of 0.74 indicates that MRK is somewhat dependend on debt financing.
MRK has a worse Debt to Equity ratio (0.74) than 68.53% 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/WACC2.14
WACC9.26%
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.
MRK has a Current ratio of 1.36. This is in the lower half of the industry: MRK underperforms 76.65% 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.
With a Quick ratio value of 1.15, MRK is not doing good in the industry: 72.59% of the companies in the same industry are doing better.
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.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.36 | ||
| Quick Ratio | 1.15 |
3. Growth
3.1 Past
The Earnings Per Share has grown by an impressive 409.33% over the past year.
The Earnings Per Share has been growing by 8.04% on average over the past years. This is quite good.
The Revenue has been growing slightly by 6.74% in the past year.
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
Based on estimates for the next years, MRK will show a small growth in Earnings Per Share. The EPS will grow by 6.16% on average per year.
Based on estimates for the next years, MRK will show a small growth in Revenue. The Revenue will grow by 2.43% on average per year.
EPS Next Y18.8%
EPS Next 2Y14.31%
EPS Next 3Y13.28%
EPS Next 5Y6.16%
Revenue Next Year1.66%
Revenue Next 2Y3.96%
Revenue Next 3Y4.55%
Revenue Next 5Y2.43%
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 10.21, the valuation of MRK can be described as reasonable.
Based on the Price/Earnings ratio, MRK is valued cheaper than 90.36% 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.
MRK is valuated reasonably with a Price/Forward Earnings ratio of 8.59.
89.85% of the companies in the same industry are more expensive than MRK, based on the Price/Forward Earnings ratio.
When comparing the Price/Forward Earnings ratio of MRK to the average of the S&P500 Index (21.08), we can say MRK is valued rather cheaply.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 10.21 | ||
| Fwd PE | 8.59 |
4.2 Price Multiples
Based on the Enterprise Value to EBITDA ratio, MRK is valued cheaply inside the industry as 86.29% of the companies are valued more expensively.
MRK's Price/Free Cash Flow ratio is rather cheap when compared to the industry. MRK is cheaper than 89.34% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 10.85 | ||
| EV/EBITDA | 8.21 |
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 13.28% in the coming years. This may justify a more expensive valuation.
PEG (NY)0.54
PEG (5Y)1.27
EPS Next 2Y14.31%
EPS Next 3Y13.28%
5. Dividend
5.1 Amount
With a Yearly Dividend Yield of 4.18%, 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.
Compared to an average industry Dividend Yield of 4.29, MRK pays a better dividend. On top of this MRK pays more dividend than 94.92% 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 2.57.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 4.18% |
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 their dividend for at least 10 years, which is a reliable track record.
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.
DP45.8%
EPS Next 2Y14.31%
EPS Next 3Y13.28%
78
+1.54 (+2.01%)
Chartmill FA Rating
GICS SectorHealth Care
GICS IndustryGroupPharmaceuticals, Biotechnology & Life Sciences
GICS IndustryPharmaceuticals
Earnings (Last)
Earnings (Next)
Inst Owners79.95%
Inst Owner Change0.01%
Ins Owners0.05%
Ins Owner Change10.45%
Market Cap196.28B
Analysts78.62
Price Target116.89 (49.86%)
Short Float %1.63%
Short Ratio2.68
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 4.18% |
Yearly Dividend3.1
Dividend Growth(5Y)6.9%
DP45.8%
Div Incr Years13
Div Non Decr Years33
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)4.4%
Min EPS beat(2)3.35%
Max EPS beat(2)5.44%
EPS beat(4)4
Avg EPS beat(4)5.72%
Min EPS beat(4)3.35%
Max EPS beat(4)9.3%
EPS beat(8)8
Avg EPS beat(8)21.17%
EPS beat(12)12
Avg EPS beat(12)17.11%
EPS beat(16)14
Avg EPS beat(16)13.66%
Revenue beat(2)1
Avg Revenue beat(2)0.05%
Min Revenue beat(2)-0.1%
Max Revenue beat(2)0.2%
Revenue beat(4)3
Avg Revenue beat(4)0.9%
Min Revenue beat(4)-0.1%
Max Revenue beat(4)2.78%
Revenue beat(8)6
Avg Revenue beat(8)1.72%
Revenue beat(12)10
Avg Revenue beat(12)2.52%
Revenue beat(16)13
Avg Revenue beat(16)1.4%
PT rev (1m)-1.06%
PT rev (3m)-11.14%
EPS NQ rev (1m)0.24%
EPS NQ rev (3m)-6.08%
EPS NY rev (1m)0.06%
EPS NY rev (3m)-5.25%
Revenue NQ rev (1m)-1.72%
Revenue NQ rev (3m)-7.02%
Revenue NY rev (1m)-0.17%
Revenue NY rev (3m)-3.28%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 10.21 | ||
| Fwd PE | 8.59 | ||
| P/S | 3.06 | ||
| P/FCF | 10.85 | ||
| P/OCF | 9.14 | ||
| P/B | 4.24 | ||
| P/tB | 23.72 | ||
| EV/EBITDA | 8.21 |
EPS(TTM)7.64
EY9.79%
EPS(NY)9.08
Fwd EY11.64%
FCF(TTM)7.19
FCFY9.22%
OCF(TTM)8.53
OCFY10.94%
SpS25.5
BVpS18.4
TBVpS3.29
PEG (NY)0.54
PEG (5Y)1.27
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 14.62% | ||
| ROE | 36.96% | ||
| ROCE | 25.03% | ||
| ROIC | 19.77% | ||
| ROICexc | 23.38% | ||
| ROICexgc | 47.44% | ||
| OM | 34.59% | ||
| PM (TTM) | 26.68% | ||
| GM | 78.19% | ||
| FCFM | 28.2% |
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 Turnover0.55
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.74 | ||
| Debt/FCF | 2.05 | ||
| Debt/EBITDA | 1.29 | ||
| Cap/Depr | 74.95% | ||
| Cap/Sales | 5.25% | ||
| Interest Coverage | 17.07 | ||
| Cash Conversion | 80.42% | ||
| Profit Quality | 105.72% | ||
| Current Ratio | 1.36 | ||
| Quick Ratio | 1.15 | ||
| Altman-Z | 3.7 |
F-Score8
WACC9.26%
ROIC/WACC2.14
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)409.33%
EPS 3Y6.87%
EPS 5Y8.04%
EPS Q2Q%5633.33%
EPS Next Y18.8%
EPS Next 2Y14.31%
EPS Next 3Y13.28%
EPS Next 5Y6.16%
Revenue 1Y (TTM)6.74%
Revenue growth 3Y9.63%
Revenue growth 5Y10.4%
Sales Q2Q%6.79%
Revenue Next Year1.66%
Revenue Next 2Y3.96%
Revenue Next 3Y4.55%
Revenue Next 5Y2.43%
EBIT growth 1Y4.93%
EBIT growth 3Y14.48%
EBIT growth 5Y18.33%
EBIT Next Year31.15%
EBIT Next 3Y15.65%
EBIT Next 5Y9.19%
FCF growth 1Y97.92%
FCF growth 3Y23.27%
FCF growth 5Y12.67%
OCF growth 1Y65.06%
OCF growth 3Y15.02%
OCF growth 5Y9.82%