MERCK & CO. INC. (MRK) Stock Fundamental Analysis
NYSE:MRK - New York Stock Exchange, Inc. - US58933Y1055 - Common Stock - Currency: USD
We assign a fundamental rating of 7 out of 10 to MRK. MRK was compared to 198 industry peers in the Pharmaceuticals industry. MRK gets an excellent profitability rating and is at the same time showing great financial health properties. 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
In the past year MRK was profitable.
MRK had a positive operating cash flow in the past year.
MRK had positive earnings in each of the past 5 years.
MRK had a positive operating cash flow in each of the past 5 years.
1.2 Ratios
The Return On Assets of MRK (14.62%) is better than 96.46% of its industry peers.
Looking at the Return On Equity, with a value of 36.96%, MRK belongs to the top 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.
MRK had an Average Return On Invested Capital over the past 3 years of 20.13%. This 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
The Profit Margin of MRK (26.68%) is better than 95.96% 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 (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.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 34.59% | ||
| PM (TTM) | 26.68% | ||
| GM | 78.19% |
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
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.
The debt/assets ratio for MRK has been reduced compared to a year ago.
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 Altman-Z score of 3.81. This is in the better half of the industry: MRK outperforms 79.80% of its industry peers.
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.
With an excellent Debt to FCF ratio value of 2.05, MRK belongs to the best of the industry, outperforming 92.93% of the companies in the same industry.
MRK has a Debt/Equity ratio of 0.74. This is a neutral value indicating MRK is somewhat dependend on debt financing.
MRK's Debt to Equity ratio of 0.74 is on the low side compared to the rest of the industry. MRK is outperformed by 67.17% of its industry peers.
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 | 0.74 | ||
| Debt/FCF | 2.05 | ||
| Altman-Z | 3.81 |
ROIC/WACC2.15
WACC9.19%
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 worse Current ratio (1.36) than 76.26% of its industry peers.
A Quick Ratio of 1.15 indicates that MRK should not have too much problems paying 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.
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 | 1.36 | ||
| Quick Ratio | 1.15 |
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.
The Revenue has been growing slightly by 4.10% in the past 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 6.16% on average per year.
Based on estimates for the next years, MRK will show a small growth in Revenue. The Revenue will grow by 2.43% on average per year.
EPS Next Y18.6%
EPS Next 2Y14.32%
EPS Next 3Y13.3%
EPS Next 5Y6.16%
Revenue Next Year1.56%
Revenue Next 2Y3.93%
Revenue Next 3Y4.56%
Revenue Next 5Y2.43%
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
MRK is valuated reasonably with a Price/Earnings ratio of 10.68.
Compared to the rest of the industry, the Price/Earnings ratio of MRK indicates a rather cheap valuation: MRK is cheaper than 89.90% of the companies listed in the same industry.
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.
Based on the Price/Forward Earnings ratio, MRK is valued 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
85.86% of the companies in the same industry are more expensive than MRK, based on the Enterprise Value to EBITDA ratio.
MRK's Price/Free Cash Flow ratio is rather cheap when compared to the industry. MRK is cheaper than 88.89% of the companies 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.
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.
PEG (NY)0.57
PEG (5Y)1.33
EPS Next 2Y14.32%
EPS Next 3Y13.3%
5. Dividend
5.1 Amount
With a Yearly Dividend Yield of 3.80%, MRK has a reasonable but not impressive dividend return.
Compared to an average industry Dividend Yield of 4.25, 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 2.44, MRK pays a better dividend.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 3.8% |
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 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.
DP45.8%
EPS Next 2Y14.32%
EPS Next 3Y13.3%
83.18
-0.08 (-0.1%)
Chartmill FA Rating
GICS SectorHealth Care
GICS IndustryGroupPharmaceuticals, Biotechnology & Life Sciences
GICS IndustryPharmaceuticals
Earnings (Last)
Earnings (Next)
Inst Owners79.95%
Inst Owner Change0.08%
Ins Owners0.05%
Ins Owner Change10.45%
Market Cap209.31B
Analysts77.5
Price Target112.45 (35.19%)
Short Float %1.67%
Short Ratio2.37
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 3.8% |
Yearly Dividend3.1
Dividend Growth(5Y)6.9%
DP45.8%
Div Incr Years13
Div Non Decr Years33
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)4.4%
Min EPS beat(2)3.35%
Max EPS beat(2)5.44%
EPS beat(4)4
Avg EPS beat(4)5.72%
Min EPS beat(4)3.35%
Max EPS beat(4)9.3%
EPS beat(8)8
Avg EPS beat(8)21.17%
EPS beat(12)12
Avg EPS beat(12)17.11%
EPS beat(16)14
Avg EPS beat(16)13.66%
Revenue beat(2)1
Avg Revenue beat(2)0.05%
Min Revenue beat(2)-0.1%
Max Revenue beat(2)0.2%
Revenue beat(4)3
Avg Revenue beat(4)0.9%
Min Revenue beat(4)-0.1%
Max Revenue beat(4)2.78%
Revenue beat(8)6
Avg Revenue beat(8)1.72%
Revenue beat(12)10
Avg Revenue beat(12)2.52%
Revenue beat(16)13
Avg Revenue beat(16)1.4%
PT rev (1m)-4.81%
PT rev (3m)-14.51%
EPS NQ rev (1m)0.36%
EPS NQ rev (3m)-5.97%
EPS NY rev (1m)-0.17%
EPS NY rev (3m)-5.42%
Revenue NQ rev (1m)-1.71%
Revenue NQ rev (3m)-7.01%
Revenue NY rev (1m)-0.27%
Revenue NY rev (3m)-3.46%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 10.68 | ||
| Fwd PE | 8.33 | ||
| P/S | 3.26 | ||
| P/FCF | 11.57 | ||
| P/OCF | 9.75 | ||
| P/B | 4.52 | ||
| P/tB | 25.29 | ||
| EV/EBITDA | 8.71 |
EPS(TTM)7.79
EY9.37%
EPS(NY)9.98
Fwd EY12%
FCF(TTM)7.19
FCFY8.65%
OCF(TTM)8.53
OCFY10.26%
SpS25.5
BVpS18.4
TBVpS3.29
PEG (NY)0.57
PEG (5Y)1.33
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 14.62% | ||
| ROE | 36.96% | ||
| ROCE | 25.03% | ||
| ROIC | 19.77% | ||
| ROICexc | 23.38% | ||
| ROICexgc | 47.44% | ||
| OM | 34.59% | ||
| PM (TTM) | 26.68% | ||
| GM | 78.19% | ||
| FCFM | 28.2% |
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 Turnover0.55
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.74 | ||
| Debt/FCF | 2.05 | ||
| Debt/EBITDA | 1.29 | ||
| Cap/Depr | 74.95% | ||
| Cap/Sales | 5.25% | ||
| Interest Coverage | 17.07 | ||
| Cash Conversion | 80.42% | ||
| Profit Quality | 105.72% | ||
| Current Ratio | 1.36 | ||
| Quick Ratio | 1.15 | ||
| Altman-Z | 3.81 |
F-Score8
WACC9.19%
ROIC/WACC2.15
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 Y18.6%
EPS Next 2Y14.32%
EPS Next 3Y13.3%
EPS Next 5Y6.16%
Revenue 1Y (TTM)4.1%
Revenue growth 3Y9.63%
Revenue growth 5Y10.4%
Sales Q2Q%-1.56%
Revenue Next Year1.56%
Revenue Next 2Y3.93%
Revenue Next 3Y4.56%
Revenue Next 5Y2.43%
EBIT growth 1Y4.93%
EBIT growth 3Y14.48%
EBIT growth 5Y18.33%
EBIT Next Year31.15%
EBIT Next 3Y15.65%
EBIT Next 5Y9.19%
FCF growth 1Y97.92%
FCF growth 3Y23.27%
FCF growth 5Y12.67%
OCF growth 1Y65.06%
OCF growth 3Y15.02%
OCF growth 5Y9.82%