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. Finally MRK also has an excellent dividend rating. With these ratings, MRK could be worth investigating further 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.
Each year in the past 5 years MRK had a positive operating cash flow.
1.2 Ratios
MRK's Return On Assets of 14.62% is amongst the best of the industry. MRK outperforms 96.46% of its industry peers.
With an excellent Return On Equity value of 36.96%, MRK belongs to the best of the industry, outperforming 96.46% of the companies in the same industry.
Looking at the Return On Invested Capital, with a value of 19.77%, MRK belongs to the top of the industry, outperforming 93.94% of the companies in the same industry.
The Average Return On Invested Capital over the past 3 years 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
Looking at the Profit Margin, with a value of 26.68%, MRK belongs to the top of the industry, outperforming 95.96% of the companies in the same industry.
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.
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.
Compared to 1 year ago, MRK has an improved debt to assets ratio.
2.2 Solvency
An Altman-Z score of 3.81 indicates that MRK is not in any danger for bankruptcy at the moment.
Looking at the Altman-Z score, with a value of 3.81, MRK is in the better half of the industry, outperforming 78.28% of the companies in the same industry.
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.
MRK has a Debt to FCF ratio of 2.05. This is amongst the best in the industry. MRK outperforms 93.43% of its industry peers.
MRK has a Debt/Equity ratio of 0.74. This is a neutral value indicating MRK is somewhat dependend on debt financing.
MRK has a worse Debt to Equity ratio (0.74) 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/WACC2.1
WACC9.4%
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 worse Current ratio (1.36) than 76.77% of its industry peers.
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.
With a Price/Earnings ratio of 10.68, the valuation of MRK can be described as very reasonable.
Based on the Price/Earnings ratio, MRK is valued cheaper than 90.40% of the companies in the same industry.
MRK is valuated cheaply when we compare the Price/Earnings ratio to 28.18, which is the current average of the S&P500 Index.
With a Price/Forward Earnings ratio of 8.33, the valuation of MRK can be described as very reasonable.
Compared to the rest of the industry, the Price/Forward Earnings ratio of MRK indicates a rather cheap valuation: MRK is cheaper than 91.41% of the companies listed in the same industry.
MRK's Price/Forward Earnings ratio indicates a rather cheap valuation when compared to the S&P500 average which is at 20.81.
Industry Rank
Sector Rank
PE
10.68
Fwd PE
8.33
4.2 Price Multiples
MRK's Enterprise Value to EBITDA ratio is rather cheap when compared to the industry. MRK is cheaper than 85.86% of the companies in the same industry.
Based on the Price/Free Cash Flow ratio, MRK is valued cheaply inside the industry as 88.89% of the companies are valued more expensively.
Industry Rank
Sector Rank
P/FCF
11.57
EV/EBITDA
8.7
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.
MRK has an outstanding profitability rating, which 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.
With a Yearly Dividend Yield of 3.89%, MRK has a reasonable but not impressive dividend return.
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 been paying a dividend for at least 10 years, so it has 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
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.
MRK's earnings are growing slower than its dividend. This means the dividend growth is not sustainable.