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 7 out of 10 in our fundamental rating. 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. This makes MRK very considerable for value and dividend and quality investing!
1. Profitability
1.1 Basic Checks
In the past year MRK was profitable.
In the past year MRK had a positive cash flow from operations.
MRK had positive earnings in each of the past 5 years.
In the past 5 years MRK always reported a positive cash flow from operatings.
1.2 Ratios
MRK has a Return On Assets of 15.14%. This is amongst the best in the industry. MRK outperforms 96.46% of its industry peers.
MRK's Return On Equity of 36.07% is amongst the best of the industry. MRK outperforms 96.46% of its industry peers.
The Return On Invested Capital of MRK (19.00%) is better than 94.44% of its industry peers.
MRK had an Average Return On Invested Capital over the past 3 years of 20.13%. This is significantly below the industry average of 42.34%.
| 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 96.46% 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 94.95% 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 84.85% 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
With a Return on Invested Capital (ROIC) well above the Cost of Capital (WACC), MRK 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.
Compared to 1 year ago, MRK has an improved debt to assets ratio.
2.2 Solvency
MRK has an Altman-Z score of 3.85. This indicates that MRK is financially healthy and has little risk of bankruptcy at the moment.
With a decent Altman-Z score value of 3.85, MRK is doing good in the industry, outperforming 79.29% of the companies in the same industry.
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 93.94% 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 65.66% 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 | 0.69 | ||
| Debt/FCF | 2.04 | ||
| Altman-Z | 3.85 |
ROIC/WACC2
WACC9.52%
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 72.22% of its industry peers.
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.
With a Quick ratio value of 1.16, MRK is not doing good in the industry: 71.21% 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.
| 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.
MRK shows a small growth in Revenue. In the last year, the Revenue has grown by 4.10%.
Measured over the past years, MRK shows a quite strong growth in Revenue. The Revenue has been growing by 10.40% on average per year.
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
The Earnings Per Share is expected to grow by 6.16% on average over the next years.
MRK is expected to show a small growth in Revenue. In the coming years, the Revenue will grow by 2.43% yearly.
EPS Next Y17.73%
EPS Next 2Y13.58%
EPS Next 3Y12.74%
EPS Next 5Y6.16%
Revenue Next Year1.68%
Revenue Next 2Y3.64%
Revenue Next 3Y4.27%
Revenue Next 5Y2.43%
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 9.96 indicates a reasonable valuation of MRK.
Based on the Price/Earnings ratio, MRK is valued cheaper than 90.40% of the companies in the same industry.
Compared to an average S&P500 Price/Earnings ratio of 25.91, MRK is valued rather cheaply.
The Price/Forward Earnings ratio is 7.87, which indicates a rather cheap 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 88.38% of the companies listed 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 21.85.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 9.96 | ||
| Fwd PE | 7.87 |
4.2 Price Multiples
Compared to the rest of the industry, the Enterprise Value to EBITDA ratio of MRK indicates a rather cheap valuation: MRK is cheaper than 86.36% of the companies listed in the same industry.
Based on the Price/Free Cash Flow ratio, MRK is valued cheaper than 89.39% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 11.46 | ||
| EV/EBITDA | 8.42 |
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.
A more expensive valuation may be justified as MRK's earnings are expected to grow with 12.74% in the coming years.
PEG (NY)0.56
PEG (5Y)1.24
EPS Next 2Y13.58%
EPS Next 3Y12.74%
5. Dividend
5.1 Amount
With a Yearly Dividend Yield of 4.33%, MRK is a good candidate for dividend investing.
MRK's Dividend Yield is rather good when compared to the industry average which is at 4.24. MRK pays more dividend than 94.95% of the companies in the same industry.
Compared to an average S&P500 Dividend Yield of 2.36, MRK pays a better dividend.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 4.33% |
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
45.54% 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%
77.58
-0.26 (-0.33%)
Chartmill FA Rating
GICS SectorHealth Care
GICS IndustryGroupPharmaceuticals, Biotechnology & Life Sciences
GICS IndustryPharmaceuticals
Earnings (Last)
Earnings (Next)
Inst Owners79.95%
Inst Owner Change0.1%
Ins Owners0.05%
Ins Owner Change10.77%
Market Cap195.22B
Analysts77.5
Price Target108.01 (39.22%)
Short Float %1.48%
Short Ratio2.18
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 4.33% |
Yearly Dividend3.1
Dividend Growth(5Y)6.9%
DP45.54%
Div Incr Years13
Div Non Decr Years33
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)-7.6%
PT rev (3m)-15.7%
EPS NQ rev (1m)-5.62%
EPS NQ rev (3m)-8.48%
EPS NY rev (1m)-0.73%
EPS NY rev (3m)-0.84%
Revenue NQ rev (1m)-0.27%
Revenue NQ rev (3m)-1.61%
Revenue NY rev (1m)0.01%
Revenue NY rev (3m)-3.12%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 9.96 | ||
| Fwd PE | 7.87 | ||
| P/S | 3.05 | ||
| P/FCF | 11.46 | ||
| P/OCF | 9.35 | ||
| P/B | 4.04 | ||
| P/tB | 17.92 | ||
| EV/EBITDA | 8.42 |
EPS(TTM)7.79
EY10.04%
EPS(NY)9.86
Fwd EY12.7%
FCF(TTM)6.77
FCFY8.73%
OCF(TTM)8.3
OCFY10.69%
SpS25.4
BVpS19.21
TBVpS4.33
PEG (NY)0.56
PEG (5Y)1.24
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 | 3.85 |
F-Score8
WACC9.52%
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 Y17.73%
EPS Next 2Y13.58%
EPS Next 3Y12.74%
EPS Next 5Y6.16%
Revenue 1Y (TTM)4.1%
Revenue growth 3Y9.63%
Revenue growth 5Y10.4%
Sales Q2Q%-1.56%
Revenue Next Year1.68%
Revenue Next 2Y3.64%
Revenue Next 3Y4.27%
Revenue Next 5Y2.43%
EBIT growth 1Y-3.79%
EBIT growth 3Y14.48%
EBIT growth 5Y18.33%
EBIT Next Year31.15%
EBIT Next 3Y15.65%
EBIT Next 5Y9.19%
FCF growth 1Y51.3%
FCF growth 3Y23.27%
FCF growth 5Y12.67%
OCF growth 1Y33.21%
OCF growth 3Y15.02%
OCF growth 5Y9.82%