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 193 industry peers in the Pharmaceuticals industry. MRK gets an excellent profitability rating and is at the same time showing great financial health properties. MRK may be a bit undervalued, certainly considering the very reasonable score on growth MRK also has an excellent dividend rating. These ratings would make MRK suitable 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.
In the past 5 years MRK has always been profitable.
MRK had a positive operating cash flow in each of the past 5 years.
1.2 Ratios
MRK has a Return On Assets of 15.14%. This is amongst the best in the industry. MRK outperforms 96.89% of its industry peers.
MRK has a better Return On Equity (36.07%) than 96.89% of its industry peers.
MRK has a better Return On Invested Capital (19.00%) than 94.82% 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 14.87%.
| 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
With an excellent Profit Margin value of 27.27%, MRK belongs to the best of the industry, outperforming 96.89% of the companies in the same industry.
MRK's Profit Margin has been stable in the last couple of years.
MRK's Operating Margin of 33.84% is amongst the best of the industry. MRK outperforms 95.85% of its industry peers.
In the last couple of years the Operating Margin of MRK has grown nicely.
Looking at the Gross Margin, with a value of 78.17%, MRK belongs to the top of the industry, outperforming 86.01% of the companies in the same industry.
In the last couple of years the Gross Margin of MRK has grown nicely.
| 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.
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.
Compared to 1 year ago, MRK has an improved debt to assets ratio.
2.2 Solvency
An Altman-Z score of 3.97 indicates that MRK is not in any danger for bankruptcy at the moment.
MRK's Altman-Z score of 3.97 is fine compared to the rest of the industry. MRK outperforms 77.20% 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.
MRK has a better Debt to FCF ratio (2.04) than 94.30% of its industry peers.
MRK has a Debt/Equity ratio of 0.69. This is a neutral value indicating MRK is somewhat dependend on debt financing.
MRK's Debt to Equity ratio of 0.69 is on the low side compared to the rest of the industry. MRK is outperformed by 66.84% 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 | 2.04 | ||
| Altman-Z | 3.97 |
ROIC/WACC2
WACC9.5%
2.3 Liquidity
A Current Ratio of 1.41 indicates that MRK should not have too much problems paying its short term obligations.
Looking at the Current ratio, with a value of 1.41, MRK is doing worse than 70.47% of the companies in the same industry.
MRK has a Quick Ratio of 1.16. 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 Quick ratio (1.16) than 70.98% 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.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.41 | ||
| Quick Ratio | 1.16 |
3. Growth
3.1 Past
MRK shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 258.99%, which is quite impressive.
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.
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.
MRK is expected to show a small growth in Revenue. In the coming years, the Revenue will grow by 2.20% yearly.
EPS Next Y17.37%
EPS Next 2Y13.89%
EPS Next 3Y12.94%
EPS Next 5Y5.96%
Revenue Next Year1.51%
Revenue Next 2Y3.63%
Revenue Next 3Y4.2%
Revenue Next 5Y2.2%
3.3 Evolution
The EPS growth rate is decreasing: in the next years the growth will be less than in the last years.
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
A Price/Earnings ratio of 10.46 indicates a reasonable valuation of MRK.
Based on the Price/Earnings ratio, MRK is valued cheaply inside the industry as 90.16% of the companies are valued more expensively.
MRK is valuated cheaply when we compare the Price/Earnings ratio to 27.19, which is the current average of the S&P500 Index.
A Price/Forward Earnings ratio of 8.23 indicates a reasonable valuation of MRK.
MRK's Price/Forward Earnings ratio is rather cheap when compared to the industry. MRK is cheaper than 86.01% of the companies 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 35.33.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 10.46 | ||
| Fwd PE | 8.23 |
4.2 Price Multiples
MRK's Enterprise Value to EBITDA ratio is rather cheap when compared to the industry. MRK is cheaper than 88.08% of the companies in the same industry.
Based on the Price/Free Cash Flow ratio, MRK is valued cheaper than 89.12% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 12.01 | ||
| EV/EBITDA | 8.96 |
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.
The excellent profitability rating of MRK may justify a higher PE ratio.
A more expensive valuation may be justified as MRK's earnings are expected to grow with 12.94% in the coming years.
PEG (NY)0.6
PEG (5Y)1.3
EPS Next 2Y13.89%
EPS Next 3Y12.94%
5. Dividend
5.1 Amount
MRK has a Yearly Dividend Yield of 3.86%. Purely for dividend investing, there may be better candidates out there.
Compared to an average industry Dividend Yield of 4.00, MRK pays a better dividend. On top of this MRK pays more dividend than 94.82% of the companies listed in the same industry.
MRK's Dividend Yield is rather good when compared to the S&P500 average which is at 2.35.
| 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 been paying a dividend for at least 10 years, so it has 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
MRK pays out 45.54% 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.
DP45.54%
EPS Next 2Y13.89%
EPS Next 3Y12.94%
81.52
-2.15 (-2.57%)
Chartmill FA Rating
GICS SectorHealth Care
GICS IndustryGroupPharmaceuticals, Biotechnology & Life Sciences
GICS IndustryPharmaceuticals
Earnings (Last)
Earnings (Next)
Inst Owners80.57%
Inst Owner Change0.02%
Ins Owners0.05%
Ins Owner Change10.77%
Market Cap204.70B
Analysts76.25
Price Target104.83 (28.59%)
Short Float %1.4%
Short Ratio2.22
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 3.86% |
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)0%
PT rev (3m)-10.31%
EPS NQ rev (1m)-0.61%
EPS NQ rev (3m)-5.36%
EPS NY rev (1m)-0.31%
EPS NY rev (3m)-1.2%
Revenue NQ rev (1m)0.34%
Revenue NQ rev (3m)0%
Revenue NY rev (1m)-0.16%
Revenue NY rev (3m)-0.15%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 10.46 | ||
| Fwd PE | 8.23 | ||
| P/S | 3.2 | ||
| P/FCF | 12.01 | ||
| P/OCF | 9.8 | ||
| P/B | 4.24 | ||
| P/tB | 18.79 | ||
| EV/EBITDA | 8.96 |
EPS(TTM)7.79
EY9.56%
EPS(NY)9.91
Fwd EY12.16%
FCF(TTM)6.79
FCFY8.32%
OCF(TTM)8.31
OCFY10.2%
SpS25.46
BVpS19.25
TBVpS4.34
PEG (NY)0.6
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 | 3.97 |
F-Score8
WACC9.5%
ROIC/WACC2
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 Y17.37%
EPS Next 2Y13.89%
EPS Next 3Y12.94%
EPS Next 5Y5.96%
Revenue 1Y (TTM)4.1%
Revenue growth 3Y9.63%
Revenue growth 5Y10.4%
Sales Q2Q%-1.56%
Revenue Next Year1.51%
Revenue Next 2Y3.63%
Revenue Next 3Y4.2%
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%