New York Stock Exchange, Inc. / Health Care / Pharmaceuticals
Technical Analysis
Fundamental Analysis
Analyst Ratings, Profile & Chart
Fundamental Rating
We assign a fundamental rating of 7 out of 10 to MRK. MRK was compared to 198 industry peers in the Pharmaceuticals industry. Both the health and profitability get an excellent rating, making MRK a very profitable company, without any liquidiy or solvency issues. MRK scores decently on growth, while it is valued quite cheap. This could make an interesting combination. MRK also has an excellent dividend rating. This makes MRK very considerable for value and dividend and quality 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.
MRK had positive earnings in each of the past 5 years.
MRK had a positive operating cash flow in each of the past 5 years.
1.2 Ratios
MRK has a Return On Assets of 14.62%. This is amongst the best in the industry. MRK outperforms 96.46% of its industry peers.
MRK's Return On Equity of 36.96% is amongst the best of the industry. MRK outperforms 96.46% of its industry peers.
The Return On Invested Capital of MRK (19.77%) is better than 93.94% of its industry peers.
MRK had an Average Return On Invested Capital over the past 3 years of 20.13%. This is significantly below the industry average of 41.61%.
Industry Rank
Sector Rank
ROA
14.62%
ROE
36.96%
ROIC
19.77%
ROA(3y)9.42%
ROA(5y)9.66%
ROE(3y)23.17%
ROE(5y)26.32%
ROIC(3y)20.13%
ROIC(5y)17.77%
1.3 Margins
MRK has a Profit Margin of 26.68%. This is amongst the best in the industry. MRK outperforms 95.96% of its industry peers.
In the last couple of years the Profit Margin of MRK has remained more or less at the same level.
MRK has a better Operating Margin (34.59%) than 95.45% of its industry peers.
MRK's Operating Margin has improved in the last couple of years.
The Gross Margin of MRK (78.19%) is better than 84.85% of its industry peers.
In the last couple of years the Gross Margin of MRK has grown nicely.
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
The debt/assets ratio for MRK has been reduced compared to a year ago.
2.2 Solvency
An Altman-Z score of 3.85 indicates that MRK is not in any danger for bankruptcy at the moment.
MRK has a Altman-Z score of 3.85. This is in the better half of the industry: MRK outperforms 78.79% 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.
Looking at the Debt to FCF ratio, with a value of 2.05, MRK belongs to the top of the industry, outperforming 92.93% of the companies in the same industry.
A Debt/Equity ratio of 0.74 indicates that MRK is somewhat dependend on debt financing.
The Debt to Equity ratio of MRK (0.74) is worse than 67.17% 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.
Industry Rank
Sector Rank
Debt/Equity
0.74
Debt/FCF
2.05
Altman-Z
3.85
ROIC/WACC2.16
WACC9.15%
2.3 Liquidity
MRK has a Current Ratio of 1.36. This is a normal value and indicates that MRK is financially healthy and should not expect problems in meeting its short term obligations.
MRK has a Current ratio of 1.36. This is in the lower half of the industry: MRK underperforms 76.26% of its industry peers.
A Quick Ratio of 1.15 indicates that MRK should not have too much problems paying its short term obligations.
MRK has a Quick ratio of 1.15. This is in the lower half of the industry: MRK underperforms 72.73% of its industry peers.
The current and quick ratio evaluation for MRK is rather negative, while it does have excellent solvency and profitability. These ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.
MRK is valuated reasonably with a Price/Earnings ratio of 10.69.
Based on the Price/Earnings ratio, MRK is valued cheaply inside the industry as 89.90% of the companies are valued more expensively.
When comparing the Price/Earnings ratio of MRK to the average of the S&P500 Index (27.85), we can say MRK is valued rather cheaply.
The Price/Forward Earnings ratio is 8.34, which indicates a very decent valuation of MRK.
89.90% of the companies in the same industry are more expensive than MRK, based on the Price/Forward Earnings ratio.
When comparing the Price/Forward Earnings ratio of MRK to the average of the S&P500 Index (20.77), we can say MRK is valued rather cheaply.
Industry Rank
Sector Rank
PE
10.69
Fwd PE
8.34
4.2 Price Multiples
Compared to the rest of the industry, the Enterprise Value to EBITDA ratio of MRK indicates a rather cheap valuation: MRK is cheaper than 85.86% of the companies listed in the same industry.
Based on the Price/Free Cash Flow ratio, MRK is valued cheaply inside the industry as 89.39% of the companies are valued more expensively.
Industry Rank
Sector Rank
P/FCF
11.58
EV/EBITDA
8.89
4.3 Compensation for Growth
The low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company.
The excellent profitability rating of MRK may justify a higher PE ratio.
MRK's earnings are expected to grow with 13.30% in the coming years. This may justify a more expensive valuation.
MRK has a Yearly Dividend Yield of 3.82%. Purely for dividend investing, there may be better candidates out there.
MRK's Dividend Yield is rather good when compared to the industry average which is at 4.56. MRK pays more dividend than 94.44% of the companies in the same industry.
MRK's Dividend Yield is rather good when compared to the S&P500 average which is at 2.45.
Industry Rank
Sector Rank
Dividend Yield
3.82%
5.2 History
The dividend of MRK is nicely growing with an annual growth rate of 6.90%!
MRK has paid a dividend for at least 10 years, which is a reliable track record.
MRK has not decreased their dividend for at least 10 years, which is a reliable track record.
Dividend Growth(5Y)6.9%
Div Incr Years13
Div Non Decr Years33
5.3 Sustainability
MRK pays out 45.80% 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.