MERCK & CO. INC. (MRK) Stock Fundamental Analysis
USA - NYSE:MRK - US58933Y1055 - Common Stock
86.32 USD
+1.53 (+1.8%)
86.5 USD
+0.18 (+0.21%)
We assign a fundamental rating of 7 out of 10 to MRK. MRK was compared to 191 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 scores decently on growth, while it is valued quite cheap. This could make an interesting combination. Finally MRK also has an excellent dividend rating. These ratings could make MRK a good candidate for value and dividend investing.
1. Profitability
1.1 Basic Checks
In the past year MRK was profitable.
MRK had a positive operating cash flow in the past year.
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 13.96% is amongst the best of the industry. MRK outperforms 95.29% of its industry peers.
MRK has a better Return On Equity (33.49%) than 96.34% of its industry peers.
MRK has a better Return On Invested Capital (20.61%) than 96.34% of its industry peers.
The Average Return On Invested Capital over the past 3 years for MRK is above the industry average of 15.45%.
The 3 year average ROIC (20.39%) for MRK is below the current ROIC(20.61%), indicating increased profibility in the last year.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 13.96% | ||
| ROE | 33.49% | ||
| ROIC | 20.61% |
ROA(3y)9.42%
ROA(5y)9.66%
ROE(3y)23.17%
ROE(5y)26.32%
ROIC(3y)20.39%
ROIC(5y)17.93%
1.3 Margins
MRK has a better Profit Margin (25.79%) than 95.81% of its industry peers.
In the last couple of years the Profit Margin of MRK has remained more or less at the same level.
The Operating Margin of MRK (37.52%) is better than 96.34% of its industry peers.
MRK's Operating Margin has improved in the last couple of years.
MRK has a better Gross Margin (78.32%) than 84.29% of its industry peers.
MRK's Gross Margin has been stable in the last couple of years.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 37.52% | ||
| PM (TTM) | 25.79% | ||
| GM | 78.32% |
OM growth 3Y5.75%
OM growth 5Y7.99%
PM growth 3Y-0.15%
PM growth 5Y1.18%
GM growth 3Y1.92%
GM growth 5Y1.45%
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.
The number of shares outstanding for MRK remains at a similar level compared to 1 year ago.
The number of shares outstanding for MRK has been reduced compared to 5 years ago.
Compared to 1 year ago, MRK has an improved debt to assets ratio.
2.2 Solvency
MRK has an Altman-Z score of 3.99. This indicates that MRK is financially healthy and has little risk of bankruptcy at the moment.
The Altman-Z score of MRK (3.99) is better than 75.92% of its industry peers.
The Debt to FCF ratio of MRK is 2.40, which is a good value as it means it would take MRK, 2.40 years of fcf income to pay off all of its debts.
Looking at the Debt to FCF ratio, with a value of 2.40, MRK belongs to the top of the industry, outperforming 91.62% 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.
The Debt to Equity ratio of MRK (0.69) is worse than 68.59% 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 | 0.69 | ||
| Debt/FCF | 2.4 | ||
| Altman-Z | 3.99 |
ROIC/WACC2.45
WACC8.42%
2.3 Liquidity
MRK has a Current Ratio of 1.42. 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 (1.42) than 70.68% of its industry peers.
A Quick Ratio of 1.17 indicates that MRK should not have too much problems paying its short term obligations.
With a Quick ratio value of 1.17, MRK is not doing good in the industry: 70.68% of the companies in the same industry are doing better.
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 | 1.42 | ||
| Quick Ratio | 1.17 |
3. Growth
3.1 Past
The Earnings Per Share has grown by an nice 18.28% 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.
MRK shows a small growth in Revenue. In the last year, the Revenue has grown by 1.82%.
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)18.28%
EPS 3Y6.87%
EPS 5Y8.04%
EPS Q2Q%-3.95%
Revenue 1Y (TTM)1.82%
Revenue growth 3Y9.63%
Revenue growth 5Y10.4%
Sales Q2Q%-1.9%
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 5.58% on average per year.
Based on estimates for the next years, MRK will show a small growth in Revenue. The Revenue will grow by 1.93% on average per year.
EPS Next Y17.93%
EPS Next 2Y12.87%
EPS Next 3Y12.24%
EPS Next 5Y5.58%
Revenue Next Year1.09%
Revenue Next 2Y3.15%
Revenue Next 3Y3.98%
Revenue Next 5Y1.93%
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.
The Revenue growth rate is decreasing: in the next years the growth will be less than in the last years.
4. Valuation
4.1 Price/Earnings Ratio
With a Price/Earnings ratio of 11.21, the valuation of MRK can be described as very reasonable.
Based on the Price/Earnings ratio, MRK is valued cheaper than 90.05% of the companies in the same industry.
MRK's Price/Earnings ratio indicates a rather cheap valuation when compared to the S&P500 average which is at 27.69.
A Price/Forward Earnings ratio of 8.87 indicates a reasonable valuation of MRK.
Compared to the rest of the industry, the Price/Forward Earnings ratio of MRK indicates a rather cheap valuation: MRK is cheaper than 86.91% of the companies listed in the same industry.
Compared to an average S&P500 Price/Forward Earnings ratio of 23.18, MRK is valued rather cheaply.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 11.21 | ||
| Fwd PE | 8.87 |
4.2 Price Multiples
Based on the Enterprise Value to EBITDA ratio, MRK is valued cheaper than 90.58% of the companies in the same industry.
Based on the Price/Free Cash Flow ratio, MRK is valued cheaply inside the industry as 87.43% of the companies are valued more expensively.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 14.65 | ||
| EV/EBITDA | 8.36 |
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.
A more expensive valuation may be justified as MRK's earnings are expected to grow with 12.24% in the coming years.
PEG (NY)0.63
PEG (5Y)1.39
EPS Next 2Y12.87%
EPS Next 3Y12.24%
5. Dividend
5.1 Amount
MRK has a Yearly Dividend Yield of 3.86%.
MRK's Dividend Yield is rather good when compared to the industry average which is at 6.88. MRK pays more dividend than 95.29% of the companies in the same industry.
MRK's Dividend Yield is rather good when compared to the S&P500 average which is at 2.34.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 3.86% |
5.2 History
The dividend of MRK is nicely growing with an annual growth rate of 6.90%!
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
48.95% 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.
DP48.95%
EPS Next 2Y12.87%
EPS Next 3Y12.24%
86.32
+1.53 (+1.8%)
Chartmill FA Rating
GICS SectorHealth Care
GICS IndustryGroupPharmaceuticals, Biotechnology & Life Sciences
GICS IndustryPharmaceuticals
Earnings (Last)
Earnings (Next)
Inst Owners80.53%
Inst Owner Change0.01%
Ins Owners0.05%
Ins Owner Change0.38%
Market Cap215.61B
Analysts75.76
Price Target101.49 (17.57%)
Short Float %1.11%
Short Ratio2.28
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 3.86% |
Yearly Dividend3.1
Dividend Growth(5Y)6.9%
DP48.95%
Div Incr Years14
Div Non Decr Years34
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)5.31%
Min EPS beat(2)2.93%
Max EPS beat(2)7.69%
EPS beat(4)4
Avg EPS beat(4)4.85%
Min EPS beat(4)2.93%
Max EPS beat(4)7.69%
EPS beat(8)8
Avg EPS beat(8)21.1%
EPS beat(12)12
Avg EPS beat(12)15.97%
EPS beat(16)16
Avg EPS beat(16)15.3%
Revenue beat(2)1
Avg Revenue beat(2)-0.54%
Min Revenue beat(2)-1.54%
Max Revenue beat(2)0.45%
Revenue beat(4)2
Avg Revenue beat(4)-0.25%
Min Revenue beat(4)-1.54%
Max Revenue beat(4)0.45%
Revenue beat(8)5
Avg Revenue beat(8)0.7%
Revenue beat(12)9
Avg Revenue beat(12)1.51%
Revenue beat(16)13
Avg Revenue beat(16)2.28%
PT rev (1m)-0.16%
PT rev (3m)-1.61%
EPS NQ rev (1m)-0.48%
EPS NQ rev (3m)-4.08%
EPS NY rev (1m)0.05%
EPS NY rev (3m)0.47%
Revenue NQ rev (1m)-0.44%
Revenue NQ rev (3m)-0.57%
Revenue NY rev (1m)-0.08%
Revenue NY rev (3m)-0.41%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 11.21 | ||
| Fwd PE | 8.87 | ||
| P/S | 3.39 | ||
| P/FCF | 14.65 | ||
| P/OCF | 11.63 | ||
| P/B | 4.4 | ||
| P/tB | 17.66 | ||
| EV/EBITDA | 8.36 |
EPS(TTM)7.7
EY8.92%
EPS(NY)9.73
Fwd EY11.28%
FCF(TTM)5.89
FCFY6.83%
OCF(TTM)7.42
OCFY8.6%
SpS25.47
BVpS19.61
TBVpS4.89
PEG (NY)0.63
PEG (5Y)1.39
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 13.96% | ||
| ROE | 33.49% | ||
| ROCE | 26.09% | ||
| ROIC | 20.61% | ||
| ROICexc | 22.76% | ||
| ROICexgc | 40.92% | ||
| OM | 37.52% | ||
| PM (TTM) | 25.79% | ||
| GM | 78.32% | ||
| FCFM | 23.14% |
ROA(3y)9.42%
ROA(5y)9.66%
ROE(3y)23.17%
ROE(5y)26.32%
ROIC(3y)20.39%
ROIC(5y)17.93%
ROICexc(3y)23.53%
ROICexc(5y)20.53%
ROICexgc(3y)51.05%
ROICexgc(5y)47.06%
ROCE(3y)25.81%
ROCE(5y)22.7%
ROICexcg growth 3Y7.57%
ROICexcg growth 5Y3.37%
ROICexc growth 3Y15.27%
ROICexc growth 5Y10.69%
OM growth 3Y5.75%
OM growth 5Y7.99%
PM growth 3Y-0.15%
PM growth 5Y1.18%
GM growth 3Y1.92%
GM growth 5Y1.45%
F-Score7
Asset Turnover0.54
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.69 | ||
| Debt/FCF | 2.4 | ||
| Debt/EBITDA | 1.19 | ||
| Cap/Depr | 82.85% | ||
| Cap/Sales | 5.99% | ||
| Interest Coverage | 17.88 | ||
| Cash Conversion | 65.1% | ||
| Profit Quality | 89.74% | ||
| Current Ratio | 1.42 | ||
| Quick Ratio | 1.17 | ||
| Altman-Z | 3.99 |
F-Score7
WACC8.42%
ROIC/WACC2.45
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)18.28%
EPS 3Y6.87%
EPS 5Y8.04%
EPS Q2Q%-3.95%
EPS Next Y17.93%
EPS Next 2Y12.87%
EPS Next 3Y12.24%
EPS Next 5Y5.58%
Revenue 1Y (TTM)1.82%
Revenue growth 3Y9.63%
Revenue growth 5Y10.4%
Sales Q2Q%-1.9%
Revenue Next Year1.09%
Revenue Next 2Y3.15%
Revenue Next 3Y3.98%
Revenue Next 5Y1.93%
EBIT growth 1Y1.85%
EBIT growth 3Y15.93%
EBIT growth 5Y19.23%
EBIT Next Year29.99%
EBIT Next 3Y15.06%
EBIT Next 5Y9.07%
FCF growth 1Y35.96%
FCF growth 3Y23.27%
FCF growth 5Y12.67%
OCF growth 1Y22.95%
OCF growth 3Y15.02%
OCF growth 5Y9.82%