MERCK & CO. INC. (MRK) Stock Fundamental Analysis
USA - New York Stock Exchange - NYSE:MRK - US58933Y1055 - Common Stock
108.34 USD
+1.44 (+1.35%)
108.05 USD
-0.29 (-0.27%)
We assign a fundamental rating of 7 out of 10 to MRK. MRK was compared to 190 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! MRK also has an excellent dividend rating. This makes MRK very considerable 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.
- 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
- MRK has a Return On Assets of 14.69%. This is amongst the best in the industry. MRK outperforms 94.74% of its industry peers.
- MRK has a Return On Equity of 36.71%. This is amongst the best in the industry. MRK outperforms 95.79% of its industry peers.
- Looking at the Return On Invested Capital, with a value of 19.15%, MRK belongs to the top of the industry, outperforming 96.32% of the companies in the same industry.
- The Average Return On Invested Capital over the past 3 years for MRK is significantly above the industry average of 12.83%.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 14.69% | ||
| ROE | 36.71% | ||
| ROIC | 19.15% |
ROA(3y)9.42%
ROA(5y)9.66%
ROE(3y)23.17%
ROE(5y)26.32%
ROIC(3y)20.39%
ROIC(5y)17.93%
1.3 Margins
- With an excellent Profit Margin value of 29.63%, MRK belongs to the best of the industry, outperforming 94.21% of the companies in the same industry.
- 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 (38.08%) is better than 96.32% of its industry peers.
- MRK's Operating Margin has improved in the last couple of years.
- Looking at the Gross Margin, with a value of 78.72%, MRK belongs to the top of the industry, outperforming 83.68% of the companies in the same industry.
- MRK's Gross Margin has been stable in the last couple of years.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 38.08% | ||
| PM (TTM) | 29.63% | ||
| GM | 78.72% |
OM growth 3Y5.75%
OM growth 5Y7.99%
PM growth 3Y-0.15%
PM growth 5Y1.18%
GM growth 3Y1.92%
GM growth 5Y1.45%
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 about the same amout of shares outstanding than it did 1 year ago.
- The number of shares outstanding for MRK has been reduced compared to 5 years ago.
- MRK has a better debt/assets ratio than last year.
2.2 Solvency
- MRK has an Altman-Z score of 4.12. This indicates that MRK is financially healthy and has little risk of bankruptcy at the moment.
- MRK has a Altman-Z score of 4.12. This is in the better half of the industry: MRK outperforms 70.53% of its industry peers.
- The Debt to FCF ratio of MRK is 3.17, which is a good value as it means it would take MRK, 3.17 years of fcf income to pay off all of its debts.
- MRK's Debt to FCF ratio of 3.17 is amongst the best of the industry. MRK outperforms 88.42% of its industry peers.
- MRK has a Debt/Equity ratio of 0.77. This is a neutral value indicating MRK is somewhat dependend on debt financing.
- MRK has a worse Debt to Equity ratio (0.77) than 70.00% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.77 | ||
| Debt/FCF | 3.17 | ||
| Altman-Z | 4.12 |
ROIC/WACC2.1
WACC9.13%
2.3 Liquidity
- A Current Ratio of 1.66 indicates that MRK should not have too much problems paying its short term obligations.
- Looking at the Current ratio, with a value of 1.66, MRK is doing worse than 67.89% of the companies in the same industry.
- A Quick Ratio of 1.44 indicates that MRK should not have too much problems paying its short term obligations.
- The Quick ratio of MRK (1.44) is worse than 64.21% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.66 | ||
| Quick Ratio | 1.44 |
3. Growth
3.1 Past
- MRK shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 48.07%, which is quite impressive.
- 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 1.68% 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)48.07%
EPS 3Y6.87%
EPS 5Y8.04%
EPS Q2Q%70.7%
Revenue 1Y (TTM)1.68%
Revenue growth 3Y9.63%
Revenue growth 5Y10.4%
Sales Q2Q%3.72%
3.2 Future
- MRK is expected to show a small growth in Earnings Per Share. In the coming years, the EPS will grow by 6.65% yearly.
- MRK is expected to show a small growth in Revenue. In the coming years, the Revenue will grow by 2.64% yearly.
EPS Next Y18.51%
EPS Next 2Y-13.49%
EPS Next 3Y10.11%
EPS Next 5Y6.65%
Revenue Next Year1.23%
Revenue Next 2Y2.83%
Revenue Next 3Y3.72%
Revenue Next 5Y2.64%
3.3 Evolution
- The EPS growth rate is stable: in the next years the growth will be about the same 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.
4. Valuation
4.1 Price/Earnings Ratio
- Based on the Price/Earnings ratio of 12.30, the valuation of MRK can be described as correct.
- MRK's Price/Earnings ratio is rather cheap when compared to the industry. MRK is cheaper than 87.89% of the companies in the same industry.
- MRK's Price/Earnings ratio indicates a rather cheap valuation when compared to the S&P500 average which is at 28.39.
- A Price/Forward Earnings ratio of 18.95 indicates a rather expensive valuation of MRK.
- Based on the Price/Forward Earnings ratio, MRK is valued a bit cheaper than 78.42% of the companies in the same industry.
- When comparing the Price/Forward Earnings ratio of MRK to the average of the S&P500 Index (25.72), we can say MRK is valued slightly cheaper.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 12.3 | ||
| Fwd PE | 18.95 |
4.2 Price Multiples
- MRK's Enterprise Value to EBITDA ratio is rather cheap when compared to the industry. MRK is cheaper than 89.47% of the companies in the same industry.
- 84.74% 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 | 20.61 | ||
| EV/EBITDA | 9.94 |
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.
PEG (NY)0.66
PEG (5Y)1.53
EPS Next 2Y-13.49%
EPS Next 3Y10.11%
5. Dividend
5.1 Amount
- With a Yearly Dividend Yield of 3.11%, MRK has a reasonable but not impressive dividend return.
- Compared to an average industry Dividend Yield of 0.46, MRK pays a better dividend. On top of this MRK pays more dividend than 95.26% 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 1.82.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 3.11% |
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 Years14
Div Non Decr Years34
5.3 Sustainability
- MRK pays out 42.60% 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.
DP42.6%
EPS Next 2Y-13.49%
EPS Next 3Y10.11%
MERCK & CO. INC. / MRK FAQ
What is the fundamental rating for MRK stock?
ChartMill assigns a fundamental rating of 7 / 10 to MRK.
Can you provide the valuation status for MERCK & CO. INC.?
ChartMill assigns a valuation rating of 7 / 10 to MERCK & CO. INC. (MRK). This can be considered as Undervalued.
Can you provide the profitability details for MERCK & CO. INC.?
MERCK & CO. INC. (MRK) has a profitability rating of 9 / 10.
What is the financial health of MERCK & CO. INC. (MRK) stock?
The financial health rating of MERCK & CO. INC. (MRK) is 6 / 10.
How sustainable is the dividend of MERCK & CO. INC. (MRK) stock?
The dividend rating of MERCK & CO. INC. (MRK) is 7 / 10 and the dividend payout ratio is 42.6%.