New York Stock Exchange, Inc. / Health Care / Pharmaceuticals
Technical Analysis
Fundamental Analysis
Analyst Ratings, Profile & Chart
Fundamental Rating
MRK gets a fundamental rating of 7 out of 10. The analysis compared the fundamentals against 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. These ratings could make MRK a good candidate 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.
In the past 5 years MRK has always been profitable.
MRK had a positive operating cash flow in each of the past 5 years.
1.2 Ratios
MRK has a better Return On Assets (14.62%) than 96.46% of its industry peers.
MRK has a Return On Equity of 36.96%. This is amongst the best in the industry. MRK outperforms 96.46% of its industry peers.
MRK has a better Return On Invested Capital (19.77%) than 93.94% of its industry peers.
Measured over the past 3 years, the Average Return On Invested Capital for MRK is significantly below the industry average of 41.62%.
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's Profit Margin of 26.68% is amongst the best of the industry. MRK outperforms 95.96% of its industry peers.
MRK's Profit Margin has been stable in the last couple of years.
With an excellent Operating Margin value of 34.59%, MRK belongs to the best of the industry, outperforming 95.45% of the companies in the same industry.
In the last couple of years the Operating Margin of MRK has grown nicely.
With an excellent Gross Margin value of 78.19%, MRK belongs to the best 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.
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.
MRK has less shares outstanding than it did 5 years ago.
MRK has a better debt/assets ratio than last year.
2.2 Solvency
MRK has an Altman-Z score of 3.81. This indicates that MRK is financially healthy and has little risk of bankruptcy at the moment.
MRK has a better Altman-Z score (3.81) than 78.28% 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.
MRK's Debt to FCF ratio of 2.05 is amongst the best of the industry. MRK outperforms 93.43% of its industry peers.
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
3.81
ROIC/WACC2.14
WACC9.25%
2.3 Liquidity
A Current Ratio of 1.36 indicates that MRK should not have too much problems paying its short term obligations.
MRK has a Current ratio of 1.36. This is in the lower half of the industry: MRK underperforms 76.77% of its industry peers.
MRK has a Quick Ratio of 1.15. 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 worse Quick ratio (1.15) than 72.73% of its industry peers.
MRK does not score too well on the current and quick ratio evaluation. However, as it has excellent solvency and profitability, these ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.
A Price/Earnings ratio of 10.68 indicates a reasonable valuation of MRK.
Based on the Price/Earnings ratio, MRK is valued cheaper than 90.40% of the companies in the same industry.
When comparing the Price/Earnings ratio of MRK to the average of the S&P500 Index (28.18), we can say MRK is valued rather cheaply.
A Price/Forward Earnings ratio of 8.33 indicates a reasonable valuation of MRK.
Based on the Price/Forward Earnings ratio, MRK is valued cheaper than 91.41% of the companies in the same industry.
The average S&P500 Price/Forward Earnings ratio is at 20.81. MRK is valued rather cheaply when compared to this.
Industry Rank
Sector Rank
PE
10.68
Fwd PE
8.33
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 Rank
Sector Rank
P/FCF
11.57
EV/EBITDA
8.7
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.
MRK has an outstanding profitability rating, which may justify a higher PE ratio.
A more expensive valuation may be justified as MRK's earnings are expected to grow with 13.30% in the coming years.
MRK has a Yearly Dividend Yield of 3.89%. Purely for dividend investing, there may be better candidates out there.
Compared to an average industry Dividend Yield of 4.18, MRK pays a better dividend. On top of this MRK pays more dividend than 94.95% of the companies listed in the same industry.
Compared to an average S&P500 Dividend Yield of 2.45, MRK pays a better dividend.
Industry Rank
Sector 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 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
45.80% of the earnings are spent on dividend by MRK. 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.