MERCK & CO. INC. (NYSE:MRK) - A Strong Value Candidate in Pharmaceuticals

MERCK & CO. INC. (NYSE:MRK) was identified as a solid value stock through our fundamental screening process. The company combines an attractive valuation with strong profitability, financial health, and steady growth, making it a potential candidate for value investors. Below, we break down the key factors that make MRK stand out.

Valuation

MRK scores a 9/10 in valuation, indicating it is priced attractively relative to its fundamentals:

• P/E Ratio: At 9.91, MRK trades well below both the industry average (18.93) and the S&P500 average (26.70).
• Forward P/E: Even lower at 7.84, suggesting earnings growth is not fully reflected in the stock price.
• Enterprise Value/EBITDA: MRK is cheaper than 86% of its pharmaceutical peers.
• Price/Free Cash Flow: Also favorable, ranking better than 89% of the industry.

Profitability

With a Profitability Rating of 8/10, MRK demonstrates strong earnings power:

• Profit Margin (27.27%) and Operating Margin (33.84%) are among the best in the industry, outperforming 96% and 95% of peers, respectively.
• Return on Equity (36.07%) and Return on Invested Capital (19.00%) are well above industry averages.

Financial Health

MRK earns a Health Rating of 7/10, supported by:

• A solid Altman-Z score (3.83), indicating low bankruptcy risk.
• A manageable Debt-to-Equity ratio (0.69) and strong free cash flow coverage of debt.
• Share buybacks have reduced outstanding shares over the past five years.

Growth

While growth is more moderate, MRK still holds a Growth Rating of 5/10:

• Past EPS Growth: An impressive 259% over the last year, with a 10.4% annual revenue growth rate over five years.
• Future Expectations: Analysts project 6.16% annual EPS growth and 2.43% revenue growth, though slower than historical trends.

Dividend Appeal

MRK also stands out for income investors:

• Dividend Yield (4.33%) is above both the industry (4.24%) and S&P500 (2.36%) averages.
• A 10-year track record of dividend growth, increasing payouts by 6.9% annually.

Our Decent Value Stocks screener lists more stocks with strong valuations and fundamentals.
For a deeper look, review the full fundamental report on MRK.

Disclaimer

This is not investment advice. The observations here are based on current data, but investors should conduct their own research before making decisions.