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 198 industry peers in the Pharmaceuticals industry. MRK has outstanding health and profitabily ratings, belonging to the best of the industry. This is a solid base for any company. MRK may be a bit undervalued, certainly considering the very reasonable score on growth 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.
MRK had a positive operating cash flow in the past year.
MRK had positive earnings in each of the past 5 years.
Each year in the past 5 years MRK had a positive operating cash flow.
1.2 Ratios
The Return On Assets of MRK (14.62%) is better 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.
With an excellent Return On Invested Capital value of 19.77%, MRK belongs to the best 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 41.67%.
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.
Looking at the Operating Margin, with a value of 34.59%, MRK belongs to the top 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.
MRK has a better Gross Margin (78.19%) 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.
The debt/assets ratio for MRK has been reduced compared to a year ago.
2.2 Solvency
An Altman-Z score of 3.81 indicates that MRK is not in any danger for bankruptcy at the moment.
With a decent Altman-Z score value of 3.81, MRK is doing good in the industry, outperforming 79.80% 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 92.93% 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.
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/WACC2.15
WACC9.19%
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 76.26% of the companies in the same industry.
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.
With a Quick ratio value of 1.15, MRK is not doing good in the industry: 72.73% of the companies in the same industry are doing better.
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 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 (28.22), we can say MRK is valued rather cheaply.
The Price/Forward Earnings ratio is 8.33, which indicates a very decent valuation of MRK.
MRK's Price/Forward Earnings ratio is rather cheap when compared to the industry. MRK is cheaper than 90.40% of the companies in the same industry.
When comparing the Price/Forward Earnings ratio of MRK to the average of the S&P500 Index (20.86), we can say MRK is valued rather cheaply.
Industry Rank
Sector Rank
PE
10.68
Fwd PE
8.33
4.2 Price Multiples
Based on the Enterprise Value to EBITDA ratio, MRK is valued cheaply inside the industry as 85.86% of the companies are valued more expensively.
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
8.71
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 3.80%. 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 4.25. 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 Rank
Sector Rank
Dividend Yield
3.8%
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
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.