MERCK & CO. INC. (NYSE:MRK) – A Strong Value Candidate in Healthcare

MERCK & CO. INC. (NYSE:MRK) stands out as an undervalued stock with solid fundamentals, making it an interesting pick for value investors. The company scores well across key financial metrics, including valuation, profitability, and financial health, while maintaining reasonable growth prospects.

Key Strengths

Valuation (Score: 9/10)

MRK appears attractively priced with a P/E ratio of 10.50, significantly below the S&P 500 average of 27.21. The forward P/E of 8.29 further supports the case for undervaluation. Compared to industry peers, 90% of pharmaceutical companies trade at higher earnings multiples, suggesting MRK could have room for appreciation.

Profitability (Score: 9/10)

The company demonstrates strong profitability with a 27.27% net profit margin, outperforming 96% of its industry peers. Return on equity (36.07%) and return on invested capital (19.00%) are also well above sector averages. Operating margins have improved in recent years, reinforcing MRK’s ability to generate earnings efficiently.

Financial Health (Score: 7/10)

MRK maintains a solid balance sheet with manageable debt levels. Its Altman-Z score of 3.93 indicates low bankruptcy risk, and the debt-to-FCF ratio of 2.04 suggests the company can comfortably service its obligations. While liquidity ratios (current and quick ratios) are slightly below industry averages, strong solvency metrics mitigate concerns.

Growth (Score: 5/10)

Past growth has been robust, with EPS expanding by 259% over the last year and revenue growing at a 10.4% annualized rate over several years. However, future growth expectations are more modest, with projected EPS growth of 5.96% and revenue growth of 2.2%. Investors should weigh this against the stock’s low valuation.

Dividend (Score: 8/10)

With a 4.11% dividend yield—higher than both the industry and S&P 500 averages—MRK is appealing for income-focused investors. The company has raised its dividend for at least 10 consecutive years, though payout sustainability should be monitored as earnings growth slows.

For a deeper look, review the full fundamental analysis of MRK.

Our Decent Value Stocks screener lists more stocks with strong valuations and solid fundamentals.

Disclaimer

This is not investment advice. The observations here are based on available data at the time of writing, and investors should conduct their own research before making decisions.