MERCK & CO. INC. (NYSE:MRK) appears to be flying under the radar despite its strong fundamentals.

Our stock screening tool has pinpointed MERCK & CO. INC. (NYSE:MRK) as an undervalued stock. MRK maintains a solid financial footing. Furthermore, it remains attractively priced. Let's delve into the specifics below.

Assessing Valuation Metrics for MRK

To assess a stock's valuation, ChartMill utilizes a Valuation Rating on a scale of 0 to 10. This comprehensive assessment considers various valuation aspects, comparing price to earnings and cash flows, while factoring in profitability and growth. MRK has achieved a 9 out of 10:

• A Price/Earnings ratio of 11.40 indicates a reasonable valuation of MRK.
• Based on the Price/Earnings ratio, MRK is valued cheaply inside the industry as 90.26% of the companies are valued more expensively.
• When comparing the Price/Earnings ratio of MRK to the average of the S&P500 Index (29.59), we can say MRK is valued rather cheaply.
• With a Price/Forward Earnings ratio of 9.60, the valuation of MRK can be described as very reasonable.
• Compared to the rest of the industry, the Price/Forward Earnings ratio of MRK indicates a rather cheap valuation: MRK is cheaper than 89.74% of the companies listed in the same industry.
• When comparing the Price/Forward Earnings ratio of MRK to the average of the S&P500 Index (22.36), we can say MRK is valued rather cheaply.
• Based on the Enterprise Value to EBITDA ratio, MRK is valued cheaper than 86.67% of the companies in the same industry.
• MRK's Price/Free Cash Flow ratio is rather cheap when compared to the industry. MRK is cheaper than 90.26% of the companies in the same industry.
• 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.

Evaluating Profitability: MRK

Discover ChartMill's exclusive Profitability Rating, a proprietary metric that assesses stocks on a scale of 0 to 10. It takes into consideration various profitability ratios and margins, both in absolute terms and relative to industry peers. Notably, MRK has achieved a 8:

• With an excellent Return On Assets value of 14.62%, MRK belongs to the best of the industry, outperforming 96.92% 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 96.92% of the companies in the same industry.
• MRK's Return On Invested Capital of 19.77% is amongst the best of the industry. MRK outperforms 94.87% of its industry peers.
• MRK has a Profit Margin of 26.68%. This is amongst the best in the industry. MRK outperforms 95.38% of its industry peers.
• MRK's Operating Margin of 34.59% is amongst the best of the industry. MRK outperforms 95.90% of its industry peers.
• In the last couple of years the Operating Margin of MRK has grown nicely.
• With an excellent Gross Margin value of 78.19%, MRK belongs to the best of the industry, outperforming 84.62% of the companies in the same industry.
• In the last couple of years the Gross Margin of MRK has grown nicely.

Unpacking MRK's Health Rating

ChartMill employs its own Health Rating for stock assessment. This rating, ranging from 0 to 10, is calculated by examining various liquidity and solvency ratios. In the case of MRK, the assigned 7 reflects its health status:

• An Altman-Z score of 3.90 indicates that MRK is not in any danger for bankruptcy at the moment.
• MRK has a better Altman-Z score (3.90) than 80.00% of its industry peers.
• MRK has a debt to FCF ratio of 2.05. This is a good value and a sign of high solvency as MRK would need 2.05 years to pay back of all of its debts.
• The Debt to FCF ratio of MRK (2.05) is better than 94.36% 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.
• 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.

Growth Analysis for MRK

ChartMill assigns a proprietary Growth Rating to each stock. The score is computed by evaluating various growth aspects, like EPS and revenue growth. We take into account the history as well as the estimated future numbers. MRK was assigned a score of 5 for growth:

• 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.
• MRK shows quite a strong growth in Earnings Per Share. Measured over the last years, the EPS has been growing by 8.04% yearly.
• MRK shows quite a strong growth in Revenue. Measured over the last years, the Revenue has been growing by 10.40% yearly.

Every day, new Decent Value stocks can be found on ChartMill in our Decent Value screener.

Check the latest full fundamental report of MRK for a complete fundamental analysis.

Keep in mind

Important Note: The content of this article is not intended as trading advice. It is essential to perform your own analysis and exercise caution when making trading decisions. The article presents observations created by automated analysis but does not guarantee any trading or investment outcomes. Always trade responsibly and make independent judgments.