MERCK & CO. INC. (MRK) Stock Fundamental Analysis
NYSE:MRK - New York Stock Exchange, Inc. - US58933Y1055 - Common Stock - Currency: USD
Taking everything into account, MRK scores 8 out of 10 in our fundamental rating. MRK was compared to 195 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 is valued quite cheap, while showing a decent growth score. This is a good 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
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
MRK has a better Return On Assets (15.14%) than 96.92% of its industry peers.
MRK has a better Return On Equity (36.07%) than 96.92% of its industry peers.
The Return On Invested Capital of MRK (19.00%) is better than 94.87% of its industry peers.
Measured over the past 3 years, the Average Return On Invested Capital for MRK is significantly above the industry average of 14.70%.
| 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
MRK has a Profit Margin of 27.27%. This is amongst the best in the industry. MRK outperforms 96.92% of its industry peers.
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 (33.84%) than 95.90% of its industry peers.
MRK's Operating Margin has improved in the last couple of years.
MRK has a Gross Margin of 78.17%. This is amongst the best in the industry. MRK outperforms 86.15% of its industry peers.
MRK's Gross Margin has improved in the last couple of years.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 33.84% | ||
| PM (TTM) | 27.27% | ||
| GM | 78.17% |
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%
2. Health
2.1 Basic Checks
MRK has a Return on Invested Capital (ROIC), which is well above the Cost of Capital (WACC), which means it is creating value.
Compared to 1 year ago, MRK has about the same amount of shares outstanding.
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 3.93 indicates that MRK is not in any danger for bankruptcy at the moment.
MRK has a better Altman-Z score (3.93) than 78.46% of its industry peers.
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.
With an excellent Debt to FCF ratio value of 2.04, MRK belongs to the best of the industry, outperforming 93.85% of the companies in the same industry.
MRK has a Debt/Equity ratio of 0.69. This is a neutral value indicating MRK is somewhat dependend on debt financing.
With a Debt to Equity ratio value of 0.69, MRK is not doing good in the industry: 66.67% 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 Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.69 | ||
| Debt/FCF | 2.04 | ||
| Altman-Z | 3.93 |
ROIC/WACC1.98
WACC9.6%
2.3 Liquidity
MRK has a Current Ratio of 1.41. 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 Current ratio of 1.41. This is in the lower half of the industry: MRK underperforms 70.77% of its industry peers.
A Quick Ratio of 1.16 indicates that MRK should not have too much problems paying its short term obligations.
MRK has a worse Quick ratio (1.16) than 70.77% 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.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.41 | ||
| Quick Ratio | 1.16 |
3. Growth
3.1 Past
The Earnings Per Share has grown by an impressive 258.99% over the past year.
The Earnings Per Share has been growing by 8.04% on average over the past years. This is quite good.
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
Based on estimates for the next years, MRK will show a small growth in Earnings Per Share. The EPS will grow by 5.96% on average per year.
The Revenue is expected to grow by 2.20% on average over the next years.
EPS Next Y17.73%
EPS Next 2Y13.58%
EPS Next 3Y12.74%
EPS Next 5Y5.96%
Revenue Next Year1.67%
Revenue Next 2Y3.7%
Revenue Next 3Y4.26%
Revenue Next 5Y2.2%
3.3 Evolution
When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is decreasing.
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.
4. Valuation
4.1 Price/Earnings Ratio
MRK is valuated reasonably with a Price/Earnings ratio of 10.49.
Compared to the rest of the industry, the Price/Earnings ratio of MRK indicates a rather cheap valuation: MRK is cheaper than 90.77% of the companies listed in the same industry.
The average S&P500 Price/Earnings ratio is at 26.31. MRK is valued rather cheaply when compared to this.
With a Price/Forward Earnings ratio of 8.29, the valuation of MRK can be described as very reasonable.
Based on the Price/Forward Earnings ratio, MRK is valued cheaply inside the industry as 86.67% of the companies are valued more expensively.
MRK's Price/Forward Earnings ratio indicates a rather cheap valuation when compared to the S&P500 average which is at 22.13.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 10.49 | ||
| Fwd PE | 8.29 |
4.2 Price Multiples
MRK's Enterprise Value to EBITDA ratio is rather cheap when compared to the industry. MRK is cheaper than 87.18% of the companies in the same industry.
89.74% of the companies in the same industry are more expensive than MRK, based on the Price/Free Cash Flow ratio.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 12.04 | ||
| EV/EBITDA | 8.78 |
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 12.74% in the coming years. This may justify a more expensive valuation.
PEG (NY)0.59
PEG (5Y)1.3
EPS Next 2Y13.58%
EPS Next 3Y12.74%
5. Dividend
5.1 Amount
MRK has a Yearly Dividend Yield of 4.17%, which is a nice return.
Compared to an average industry Dividend Yield of 4.16, MRK pays a better dividend. On top of this MRK pays more dividend than 95.38% of the companies listed in the same industry.
Compared to an average S&P500 Dividend Yield of 2.39, MRK pays a better dividend.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 4.17% |
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 Years14
Div Non Decr Years34
5.3 Sustainability
45.54% 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.
DP45.54%
EPS Next 2Y13.58%
EPS Next 3Y12.74%
81.71
-0.11 (-0.13%)
Chartmill FA Rating
GICS SectorHealth Care
GICS IndustryGroupPharmaceuticals, Biotechnology & Life Sciences
GICS IndustryPharmaceuticals
Earnings (Last)
Earnings (Next)
Inst Owners79.95%
Inst Owner Change0.18%
Ins Owners0.05%
Ins Owner Change10.77%
Market Cap205.18B
Analysts76.88
Price Target104.83 (28.3%)
Short Float %1.64%
Short Ratio2.44
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 4.17% |
Yearly Dividend3.1
Dividend Growth(5Y)6.9%
DP45.54%
Div Incr Years14
Div Non Decr Years34
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)4.19%
Min EPS beat(2)2.93%
Max EPS beat(2)5.44%
EPS beat(4)4
Avg EPS beat(4)4.13%
Min EPS beat(4)2.93%
Max EPS beat(4)5.44%
EPS beat(8)8
Avg EPS beat(8)20.93%
EPS beat(12)12
Avg EPS beat(12)16.06%
EPS beat(16)15
Avg EPS beat(16)14.76%
Revenue beat(2)1
Avg Revenue beat(2)0.18%
Min Revenue beat(2)-0.1%
Max Revenue beat(2)0.45%
Revenue beat(4)3
Avg Revenue beat(4)0.32%
Min Revenue beat(4)-0.1%
Max Revenue beat(4)0.71%
Revenue beat(8)6
Avg Revenue beat(8)1.27%
Revenue beat(12)10
Avg Revenue beat(12)1.96%
Revenue beat(16)14
Avg Revenue beat(16)2.49%
PT rev (1m)-6.78%
PT rev (3m)-11.26%
EPS NQ rev (1m)0.9%
EPS NQ rev (3m)-7.26%
EPS NY rev (1m)-0.73%
EPS NY rev (3m)-0.84%
Revenue NQ rev (1m)-0.07%
Revenue NQ rev (3m)-1.76%
Revenue NY rev (1m)-0.09%
Revenue NY rev (3m)-0.17%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 10.49 | ||
| Fwd PE | 8.29 | ||
| P/S | 3.21 | ||
| P/FCF | 12.04 | ||
| P/OCF | 9.83 | ||
| P/B | 4.24 | ||
| P/tB | 18.84 | ||
| EV/EBITDA | 8.78 |
EPS(TTM)7.79
EY9.53%
EPS(NY)9.86
Fwd EY12.06%
FCF(TTM)6.79
FCFY8.3%
OCF(TTM)8.31
OCFY10.18%
SpS25.46
BVpS19.25
TBVpS4.34
PEG (NY)0.59
PEG (5Y)1.3
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 15.14% | ||
| ROE | 36.07% | ||
| ROCE | 24.05% | ||
| ROIC | 19% | ||
| ROICexc | 21.17% | ||
| ROICexgc | 39.48% | ||
| OM | 33.84% | ||
| PM (TTM) | 27.27% | ||
| GM | 78.17% | ||
| FCFM | 26.66% |
ROA(3y)9.42%
ROA(5y)9.66%
ROE(3y)23.17%
ROE(5y)26.32%
ROIC(3y)20.13%
ROIC(5y)17.77%
ROICexc(3y)23.21%
ROICexc(5y)20.34%
ROICexgc(3y)50.41%
ROICexgc(5y)46.67%
ROCE(3y)25.47%
ROCE(5y)22.5%
ROICexcg growth 3Y6.23%
ROICexcg growth 5Y2.59%
ROICexc growth 3Y13.83%
ROICexc growth 5Y9.86%
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%
F-Score8
Asset Turnover0.56
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.69 | ||
| Debt/FCF | 2.04 | ||
| Debt/EBITDA | 1.28 | ||
| Cap/Depr | 83.2% | ||
| Cap/Sales | 6.01% | ||
| Interest Coverage | 16.44 | ||
| Cash Conversion | 79.55% | ||
| Profit Quality | 97.73% | ||
| Current Ratio | 1.41 | ||
| Quick Ratio | 1.16 | ||
| Altman-Z | 3.93 |
F-Score8
WACC9.6%
ROIC/WACC1.98
Cap/Depr(3y)95.66%
Cap/Depr(5y)110.48%
Cap/Sales(3y)6.36%
Cap/Sales(5y)7.78%
Profit Quality(3y)903.98%
Profit Quality(5y)573.68%
High Growth Momentum
Growth
EPS 1Y (TTM)258.99%
EPS 3Y6.87%
EPS 5Y8.04%
EPS Q2Q%7.25%
EPS Next Y17.73%
EPS Next 2Y13.58%
EPS Next 3Y12.74%
EPS Next 5Y5.96%
Revenue 1Y (TTM)4.1%
Revenue growth 3Y9.63%
Revenue growth 5Y10.4%
Sales Q2Q%-1.56%
Revenue Next Year1.67%
Revenue Next 2Y3.7%
Revenue Next 3Y4.26%
Revenue Next 5Y2.2%
EBIT growth 1Y-3.79%
EBIT growth 3Y14.48%
EBIT growth 5Y18.33%
EBIT Next Year30.08%
EBIT Next 3Y15.02%
EBIT Next 5Y9.31%
FCF growth 1Y51.3%
FCF growth 3Y23.27%
FCF growth 5Y12.67%
OCF growth 1Y33.21%
OCF growth 3Y15.02%
OCF growth 5Y9.82%