Decent Value Stocks. Analyze the stocks with a good fundamental valuation, while still showing decent profitability, health and growth.


MERCK & CO. INC.

New York Stock Exchange, Inc. / Health Care / Pharmaceuticals

Fundamental Rating

7

MRK gets a fundamental rating of 7 out of 10. The analysis compared the fundamentals against 198 industry peers in the Pharmaceuticals industry. MRK scores excellent points on both the profitability and health parts. This is a solid base for a good stock. MRK may be a bit undervalued, certainly considering the very reasonable score on growth Finally MRK also has an excellent dividend rating. With these ratings, MRK could be worth investigating further for value and dividend and quality investing!.


Dividend Valuation Growth Profitability Health

8

1. Profitability

1.1 Basic Checks

In the past year MRK was profitable.
MRK had a positive operating cash flow in the past year.
Each year in the past 5 years MRK has been profitable.
In the past 5 years MRK always reported a positive cash flow from operatings.
MRK Yearly Net Income VS EBIT VS OCF VS FCFMRK Yearly Net Income VS EBIT VS OCF VS FCFYearly Net Income VS EBIT VS OCF VS FCF 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 5B 10B 15B 20B

1.2 Ratios

With an excellent Return On Assets value of 14.62%, MRK belongs to the best of the industry, outperforming 96.46% of the companies in the same industry.
MRK has a better Return On Equity (36.96%) than 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 41.67%.
Industry RankSector 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%
MRK Yearly ROA, ROE, ROICMRK Yearly ROA, ROE, ROICYearly ROA, ROE, ROIC 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 10 20 30

1.3 Margins

With an excellent Profit Margin value of 26.68%, MRK belongs to the best of the industry, outperforming 95.96% of the companies in the same industry.
MRK's Profit Margin has been stable in the last couple of years.
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.
Looking at the Gross Margin, with a value of 78.19%, MRK belongs to the top of the industry, outperforming 84.85% of the companies in the same industry.
In the last couple of years the Gross Margin of MRK has grown nicely.
Industry RankSector Rank
OM 34.59%
PM (TTM) 26.68%
GM 78.19%
OM growth 3Y4.43%
OM growth 5Y7.18%
PM growth 3Y-0.15%
PM growth 5Y1.18%
GM growth 3Y3.55%
GM growth 5Y2.42%
MRK Yearly Profit, Operating, Gross MarginsMRK Yearly Profit, Operating, Gross MarginsYearly Profit, Operating, Gross Margins 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 20 40 60 80

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7

2. Health

2.1 Basic Checks

The Return on Invested Capital (ROIC) is well above the Cost of Capital (WACC), so MRK 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.
MRK Yearly Shares OutstandingMRK Yearly Shares OutstandingYearly Shares Outstanding 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 500M 1B 1.5B 2B 2.5B
MRK Yearly Total Debt VS Total AssetsMRK Yearly Total Debt VS Total AssetsYearly Total Debt VS Total Assets 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 20B 40B 60B 80B 100B

2.2 Solvency

An Altman-Z score of 3.81 indicates that MRK is not in any danger for bankruptcy at the moment.
The Altman-Z score of MRK (3.81) is better than 78.28% of its industry peers.
The Debt to FCF ratio of MRK is 2.05, which is a good value as it means it would take MRK, 2.05 years of fcf income to pay off 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 93.43% of the companies in the same industry.
A Debt/Equity ratio of 0.74 indicates that MRK is somewhat dependend on debt financing.
With a Debt to Equity ratio value of 0.74, MRK is not doing good in the industry: 67.17% of the companies in the same industry are doing better.
Even though the debt/equity ratio score it not favorable for MRK, it has very limited outstanding debt, so we won't put too much weight on the DE evaluation.
Industry RankSector Rank
Debt/Equity 0.74
Debt/FCF 2.05
Altman-Z 3.81
ROIC/WACC2.14
WACC9.25%
MRK Yearly LT Debt VS Equity VS FCFMRK Yearly LT Debt VS Equity VS FCFYearly LT Debt VS Equity VS FCF 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 10B 20B 30B 40B

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.
Looking at the Current ratio, with a value of 1.36, MRK is doing worse than 76.77% of the companies in the same industry.
A Quick Ratio of 1.15 indicates that MRK should not have too much problems paying its short term obligations.
The Quick ratio of MRK (1.15) is worse than 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.
Industry RankSector Rank
Current Ratio 1.36
Quick Ratio 1.15
MRK Yearly Current Assets VS Current LiabilitesMRK Yearly Current Assets VS Current LiabilitesYearly Current Assets VS Current Liabilites 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 10B 20B 30B

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5

3. Growth

3.1 Past

The Earnings Per Share has grown by an impressive 258.99% over the past year.
Measured over the past years, MRK shows a quite strong growth in Earnings Per Share. The EPS has been growing by 8.04% on average per year.
Looking at the last year, MRK shows a small growth in Revenue. The Revenue has grown by 4.10% in the last year.
MRK shows quite a strong growth in Revenue. Measured over the last years, the Revenue has been growing by 10.40% yearly.
EPS 1Y (TTM)258.99%
EPS 3Y6.87%
EPS 5Y8.04%
EPS Q2Q%7.25%
Revenue 1Y (TTM)4.1%
Revenue growth 3Y9.63%
Revenue growth 5Y10.4%
Sales Q2Q%-1.56%

3.2 Future

The Earnings Per Share is expected to grow by 6.16% on average over the next years.
Based on estimates for the next years, MRK will show a small growth in Revenue. The Revenue will grow by 2.43% on average per year.
EPS Next Y18.6%
EPS Next 2Y14.32%
EPS Next 3Y13.3%
EPS Next 5Y6.16%
Revenue Next Year1.56%
Revenue Next 2Y3.93%
Revenue Next 3Y4.56%
Revenue Next 5Y2.43%

3.3 Evolution

The EPS growth rate is decreasing: in the next years the growth will be less than in the last years.
When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is decreasing.
MRK Yearly Revenue VS EstimatesMRK Yearly Revenue VS EstimatesYearly Revenue VS Estimates 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 20B 40B 60B
MRK Yearly EPS VS EstimatesMRK Yearly EPS VS EstimatesYearly EPS VS Estimates 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2 4 6 8 10

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9

4. Valuation

4.1 Price/Earnings Ratio

MRK is valuated reasonably with a Price/Earnings ratio of 10.68.
Based on the Price/Earnings ratio, MRK is valued cheaply inside the industry as 90.40% of the companies are valued more expensively.
MRK's Price/Earnings ratio indicates a rather cheap valuation when compared to the S&P500 average which is at 28.22.
The Price/Forward Earnings ratio is 8.33, which indicates a very decent valuation of MRK.
Based on the Price/Forward Earnings ratio, MRK is valued cheaper than 91.41% of the companies in the same industry.
MRK is valuated cheaply when we compare the Price/Forward Earnings ratio to 20.86, which is the current average of the S&P500 Index.
Industry RankSector Rank
PE 10.68
Fwd PE 8.33
MRK Price Earnings VS Forward Price EarningsMRK Price Earnings VS Forward Price Earnings ChartPrice Earnings - Forward Price Earnings PE FPE 5 10 15 20 25

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.
Compared to the rest of the industry, the Price/Free Cash Flow ratio of MRK indicates a rather cheap valuation: MRK is cheaper than 88.89% of the companies listed in the same industry.
Industry RankSector Rank
P/FCF 11.57
EV/EBITDA 8.7
MRK Per share dataMRK EPS, Sales, OCF, FCF, BookValue per sharePer Share Data Per Share 5 10 15 20 25

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.
PEG (NY)0.57
PEG (5Y)1.33
EPS Next 2Y14.32%
EPS Next 3Y13.3%

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7

5. Dividend

5.1 Amount

MRK has a Yearly Dividend Yield of 3.89%. 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 4.20. MRK pays more dividend than 94.95% of the companies in the same industry.
Compared to an average S&P500 Dividend Yield of 2.44, MRK pays a better dividend.
Industry RankSector Rank
Dividend Yield 3.89%

5.2 History

On average, the dividend of MRK grows each year by 6.90%, which is quite nice.
MRK has paid a dividend for at least 10 years, which is a reliable track record.
MRK has not decreased its dividend for at least 10 years, so it has a reliable track record of non decreasing dividend.
Dividend Growth(5Y)6.9%
Div Incr Years13
Div Non Decr Years33
MRK Yearly Dividends per shareMRK Yearly Dividends per shareYearly Dividends per share 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 1 2 3

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.
MRK's earnings are growing slower than its dividend. This means the dividend growth is not sustainable.
DP45.8%
EPS Next 2Y14.32%
EPS Next 3Y13.3%
MRK Yearly Income VS Free CF VS DividendMRK Yearly Income VS Free CF VS DividendYearly Income VS Free CF VS Dividend 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 5B 10B 15B
MRK Dividend Payout.MRK Dividend Payout, showing the Payout Ratio.MRK Dividend Payout.PayoutRetained Earnings

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