MERCK & CO. INC. (MRK) Stock Fundamental Analysis
USA - New York Stock Exchange - NYSE:MRK - US58933Y1055 - Common Stock
109.445 USD
+2.54 (+2.38%)
We assign a fundamental rating of 7 out of 10 to MRK. MRK was compared to 190 industry peers in the Pharmaceuticals industry. While MRK belongs to the best of the industry regarding profitability, there are some minor concerns on its financial health. MRK may be a bit undervalued, certainly considering the very reasonable score on growth Finally MRK also has an excellent dividend rating. With these ratings, MRK could be worth investigating further for value and dividend investing!.
1. Profitability
1.1 Basic Checks
- MRK had positive earnings in the past year.
- In the past year MRK had a positive cash flow from operations.
- 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.
- MRK has a better Return On Invested Capital (19.15%) than 96.32% of its industry peers.
- MRK had an Average Return On Invested Capital over the past 3 years of 20.39%. This 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.
- With an excellent Operating Margin value of 38.08%, MRK belongs to the best of the industry, outperforming 96.32% of the companies in the same industry.
- In the last couple of years the Operating Margin of MRK has grown nicely.
- MRK has a better Gross Margin (78.72%) than 83.68% of its industry peers.
- 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
- MRK has a Return on Invested Capital (ROIC), which is well above the Cost of Capital (WACC), which means it is creating value.
- MRK has about the same amout of shares outstanding than it did 1 year ago.
- Compared to 5 years ago, MRK has less shares outstanding
- Compared to 1 year ago, MRK has an improved debt to assets ratio.
2.2 Solvency
- An Altman-Z score of 4.12 indicates that MRK is not in any danger for bankruptcy at the moment.
- Looking at the Altman-Z score, with a value of 4.12, MRK is in the better half of the industry, outperforming 70.53% of the companies in the same industry.
- 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 has a better Debt to FCF ratio (3.17) than 88.42% of its industry peers.
- A Debt/Equity ratio of 0.77 indicates that MRK is somewhat dependend on debt financing.
- Looking at the Debt to Equity ratio, with a value of 0.77, MRK is doing worse than 70.00% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.77 | ||
| Debt/FCF | 3.17 | ||
| Altman-Z | 4.12 |
ROIC/WACC2.11
WACC9.08%
2.3 Liquidity
- MRK has a Current Ratio of 1.66. 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 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.
- MRK's Quick ratio of 1.44 is on the low side compared to the rest of the industry. MRK is outperformed by 64.21% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.66 | ||
| Quick Ratio | 1.44 |
3. Growth
3.1 Past
- The Earnings Per Share has grown by an impressive 48.07% over the past year.
- 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.
- MRK shows a small growth in Revenue. In the last year, the Revenue has grown by 1.68%.
- Measured over the past years, MRK shows a quite strong growth in Revenue. The Revenue has been growing by 10.40% on average per year.
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
- Based on estimates for the next years, MRK will show a small growth in Earnings Per Share. The EPS will grow by 6.65% on average per year.
- 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.
- 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
- A Price/Earnings ratio of 12.42 indicates a correct valuation of MRK.
- Compared to the rest of the industry, the Price/Earnings ratio of MRK indicates a rather cheap valuation: MRK is cheaper than 87.89% of the companies listed in the same industry.
- Compared to an average S&P500 Price/Earnings ratio of 28.60, MRK is valued rather cheaply.
- With a Price/Forward Earnings ratio of 19.14, MRK is valued on the expensive side.
- Compared to the rest of the industry, the Price/Forward Earnings ratio of MRK indicates a somewhat cheap valuation: MRK is cheaper than 78.42% of the companies listed in the same industry.
- Compared to an average S&P500 Price/Forward Earnings ratio of 25.83, MRK is valued a bit cheaper.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 12.42 | ||
| Fwd PE | 19.14 |
4.2 Price Multiples
- Based on the Enterprise Value to EBITDA ratio, MRK is valued cheaply inside the industry as 89.47% of the companies are valued more expensively.
- 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 | 20.82 | ||
| 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)0.67
PEG (5Y)1.55
EPS Next 2Y-13.49%
EPS Next 3Y10.11%
5. Dividend
5.1 Amount
- MRK has a Yearly Dividend Yield of 3.11%.
- MRK's Dividend Yield is rather good when compared to the industry average which is at 0.46. MRK pays more dividend than 95.26% of the companies in the same industry.
- Compared to an average S&P500 Dividend Yield of 1.82, MRK pays a better dividend.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 3.11% |
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
- 42.60% of the earnings are spent on dividend by MRK. 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%.