New York Stock Exchange, Inc. / Health Care / Pharmaceuticals
Technical Analysis
Fundamental Analysis
Analyst Ratings, Profile & Chart
Fundamental Rating
Taking everything into account, MRK scores 7 out of 10 in our fundamental rating. MRK was compared to 197 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. Finally 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
In the past year MRK was profitable.
In the past year MRK had a positive cash flow from operations.
MRK had positive earnings in each of the past 5 years.
In the past 5 years MRK always reported a positive cash flow from operatings.
1.2 Ratios
MRK has a better Return On Assets (15.14%) than 96.45% of its industry peers.
MRK's Return On Equity of 36.07% is amongst the best of the industry. MRK outperforms 96.45% of its industry peers.
MRK's Return On Invested Capital of 19.00% is amongst the best of the industry. MRK outperforms 94.42% of its industry peers.
The Average Return On Invested Capital over the past 3 years for MRK is significantly below the industry average of 42.34%.
Industry Rank
Sector Rank
ROA
15.14%
ROE
36.07%
ROIC
19%
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
Looking at the Profit Margin, with a value of 27.27%, MRK belongs to the top of the industry, outperforming 96.45% of the companies in the same industry.
MRK's Profit Margin has been stable in the last couple of years.
Looking at the Operating Margin, with a value of 33.84%, MRK belongs to the top of the industry, outperforming 94.92% of the companies in the same industry.
MRK's Operating Margin has improved in the last couple of years.
With an excellent Gross Margin value of 78.17%, MRK belongs to the best of the industry, outperforming 85.28% of the companies in the same industry.
MRK's Gross Margin has improved in the last couple of years.
MRK has a Return on Invested Capital (ROIC), which is well above the Cost of Capital (WACC), which means it is creating value.
The number of shares outstanding for MRK remains at a similar level compared to 1 year ago.
MRK has less shares outstanding than it did 5 years ago.
MRK has a better debt/assets ratio than last year.
2.2 Solvency
An Altman-Z score of 3.84 indicates that MRK is not in any danger for bankruptcy at the moment.
With a decent Altman-Z score value of 3.84, MRK is doing good in the industry, outperforming 78.68% of the companies in the same industry.
The Debt to FCF ratio of MRK is 2.04, which is a good value as it means it would take MRK, 2.04 years of fcf income to pay off all of its debts.
MRK's Debt to FCF ratio of 2.04 is amongst the best of the industry. MRK outperforms 93.91% of its industry peers.
MRK has a Debt/Equity ratio of 0.69. This is a neutral value indicating MRK is somewhat dependend on debt financing.
MRK's Debt to Equity ratio of 0.69 is on the low side compared to the rest of the industry. MRK is outperformed by 65.48% 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
0.69
Debt/FCF
2.04
Altman-Z
3.84
ROIC/WACC2
WACC9.5%
2.3 Liquidity
A Current Ratio of 1.41 indicates that MRK should not have too much problems paying its short term obligations.
With a Current ratio value of 1.41, MRK is not doing good in the industry: 70.05% of the companies in the same industry are doing better.
MRK has a Quick Ratio of 1.16. This is a normal value and indicates that MRK is financially healthy and should not expect problems in meeting its short term obligations.
The Quick ratio of MRK (1.16) is worse than 69.54% 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.
With a Price/Earnings ratio of 9.96, the valuation of MRK can be described as very reasonable.
Compared to the rest of the industry, the Price/Earnings ratio of MRK indicates a rather cheap valuation: MRK is cheaper than 90.36% of the companies listed in the same industry.
When comparing the Price/Earnings ratio of MRK to the average of the S&P500 Index (26.35), we can say MRK is valued rather cheaply.
Based on the Price/Forward Earnings ratio of 7.87, the valuation of MRK can be described as very cheap.
Based on the Price/Forward Earnings ratio, MRK is valued cheaply inside the industry as 88.32% of the companies are valued more expensively.
The average S&P500 Price/Forward Earnings ratio is at 22.20. MRK is valued rather cheaply when compared to this.
Industry Rank
Sector Rank
PE
9.96
Fwd PE
7.87
4.2 Price Multiples
86.29% of the companies in the same industry are more expensive than MRK, based on the Enterprise Value to EBITDA ratio.
Based on the Price/Free Cash Flow ratio, MRK is valued cheaply inside the industry as 89.85% of the companies are valued more expensively.
Industry Rank
Sector Rank
P/FCF
11.43
EV/EBITDA
8.38
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.
The excellent profitability rating of MRK may justify a higher PE ratio.
MRK's earnings are expected to grow with 12.74% in the coming years. This may justify a more expensive valuation.
MRK has a Yearly Dividend Yield of 4.21%, which is a nice return.
Compared to an average industry Dividend Yield of 4.20, MRK pays a better dividend. On top of this MRK pays more dividend than 95.43% of the companies listed in the same industry.
MRK's Dividend Yield is rather good when compared to the S&P500 average which is at 2.40.
Industry Rank
Sector Rank
Dividend Yield
4.21%
5.2 History
On average, the dividend of MRK grows each year by 6.90%, which is quite nice.
MRK has been paying a dividend for at least 10 years, so it has 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 45.54% of its income as dividend. This is a bit on the high side, but may be sustainable.
MRK's earnings are growing slower than its dividend. This means the dividend growth is not sustainable.