MRK  Merck & Company Inc.

Exchange

NYSE

Sector

Consumer Durables

Industry

Major Pharmaceuticals

Market Cap.

181.56B

Vuru Grade

54.36/100

Current Price

$65.85
+0.56 (+0.86%)

Growth Price

$54.63
Overvalued by 17.04%

Stability Price

$20.59
Overvalued by 68.73%

Company Metrics

  • P/E 32.28
  • P/S 4.52
  • P/B 4.12
  • EPS 2.04
  • Cash ROIC 12.97%
  • Cash Ratio 0.70
  • Dividend 1.88 / 2.87 %
  • Avg. Vol. 10.87M
  • Shares 2.76B
  • Market Cap. 181.56B

Company Description

Merck & Co., Inc. provides various health solutions through its prescription medicines, vaccines, biologic therapies, animal health, and consumer care products. The company's Pharmaceutical segment provides human health pharmaceutical products, such as therapeutic and preventive agents for the treatment of human disorders in the areas of bone, respiratory, immunology, dermatology, cardiovascular, ... more


Download 10 Years of Financial Statements:
Income Statement   Balance Sheet   Cash Flow

News

Merck & Co., Inc. (NYSE:MRK) Files An 8-K Material Impairments
Market Exclusive - 12 hours ago
On February 17, 2017, Merck determined that it will record an intangible asset impairment charge related to the research program for MK-3682, uprifosbuvir, a nucleotide prodrug in clinical development that is being evaluated for the treatment of ...
Better Buy: Pfizer Inc. vs. Merck & Co. Inc. - Motley Fool
Merck & Company Inc. (new) (MRK) Closes 0.86% Up on the Day for February 23 - Equities.com
Better Buy: Merck & Co. Inc. vs. GlaxoSmithKline
Motley Fool - Feb 7, 2017
They're two of the biggest pharmaceutical companies in the world, but Merck (NYSE:MRK) and GlaxoSmithKline (NYSE:GSK) have had very different paths lately.
The FDA Accepts Keytruda From Merck & Co., Inc. (NYSE:MRK) For Bladder Cancer - Market Exclusive
EOD Risers: McDonald's Corporation, Merck & Co., Inc., Microsoft Corporation ...
DirectorsTalk Interviews - 28 minutes ago
Shares in Merck & Co., Inc. EPIC code: (NYSE:MRK) a global healthcare company, climbed 0.86% or 0.56 points during yesterday's session.
Merck & Co., Inc. (MRK) Stock: The Long-Awaited Breakout?
Investorplace.com - Feb 3, 2017
Shares of global pharmaceutical company Merck & Co., Inc. (NYSE:MRK) rallied 3.35% on Thursday on the back of its latest quarterly financial results.
Merck & Company Inc. (new) (MRK) Closes 0.17% Up on the Day for February 03 - Equities.com
Forward Earnings Estimate of Merck & Company, Inc.(MRK)
Highland Mirror - 22 hours ago
Merck & Company, Inc.(MRK): For the most recent quarter end, Merck & Company, Inc. reported Annual Earnings of $0.89.
Meag Munich Ergo Kapitalanlagegesellschaft Mbh Buys Merck & Co Inc ...
Nasdaq - Jan 25, 2017
Reik & Co., Llc sold out the holdings in Abbott Laboratories. The sale prices were between $37.6 and $43.5, with an estimated average price of $39.65.
Earnings Clues on Merck & Co., Inc. (MRK), KeyCorp (KEY) Analyst's Predictions
StockNewsJournal - 20 hours ago
ROI deals with the invested cash in the company and the return the investor realize on that money based on the net profit of the business.
EOD Risers: JPMorgan Chase & Co., McDonald's Corporation, Merck & Co., Inc ...
DirectorsTalk Interviews - Feb 22, 2017
Shares in JPMorgan Chase & Co. EPIC code: (NYSE:JPM) a financial holding company engaged in investment banking, financial services, gained 0.86% or 0.78 points during the course of yesterday's session.
Merck & Company Inc. (new) (MRK) Closes 0.15% Up on the Day for February 16
Equities.com - Feb 16, 2017
Shares of Merck & Company Inc. (new) (MRK) ended the trading day Thursday at $65.26, representing a move of 0.15%, or $0.1 per share, on volume of 12.34 million shares.
Sirius XM Holdings Inc., Merck & Co., Inc. Post Solid Fourth Quarter Results
ValueWalk - Feb 2, 2017
Sirius XM and Merck released their latest earnings reports before opening bell this morning. Sirius XM reported $1.3 billion in revenue, which was in line with the consensus estimate.
Growth Rate Assumed by Market

We did a reverse valuation to calculate the growth rate the market is assuming for MRK to be considered fairly valued at its current market price. It's useful to compare this to the growth rate we're assuming for the Growth Price.

Future Free Cash Flow Growth Rate

This is the annual growth rate we've applied to calculate MRK's Free Cash Flow for the next 10 years. To calculate it, we looked at several time periods of the last 10 years. Feel free to adjust it, but we limit the initial growth rate to 20% and slow it down over the years. Otherwise, long-term sustainability issues come into play.

Discount Rate

The discount rate is the annual rate of return an investor requires to take the risk of investing in a single stock. To account for that risk, this should be above 8-10%, as this is the avg. annual rate of return for the S&P500 over the past 100 years.

$65.85 Current Price

$54.63 Growth Price (DCF)

Overvalued by 17.04%


Growth Rate Assumed by Market: 16.01%


Future Free Cash Flow Growth Rate: 9.8%


Discount Rate: 15.0%


Show Free Cash Flow numbers

$20.59 Stability Price (EPV)

Overvalued by 68.73%


Discount Rate: 15.0%

$48.37 Book Price

Overvalued by 26.54%


Satisfactory Cash Return on Invested Capital over the past 5 years

MRK has somewhat efficiently invested its financial resources in buildings, projects, and equipment. If CROIC is inconsistent, it's likely MRK could be benefiting from a one-time event or has a mixed history of investing capital productively. Read the company's Annual Report to determine whether this can improve.

MRK has created $12.97 of cash for every $100 invested.
Figures in USD. Fiscal year ends in December
20112012201320142015
Free Cash Flow 10.66B 8.07B 10.11B 5.54B 11.14B
divided by
Invested Capital 73.91B 71.64B 70.29B 63.85B 69.15B
Cash ROIC 14.42% 11.26% 14.38% 8.68% 16.11%

Inconsistent Return on Equity over the past 5 years

MRK has generated adequate returns with capital that shareholders have invested. However, there has been some inconsistency from year-to-year. Look at reasons for this inconsistency to determine the likelihood of future sustainability.

MRK has generated $13.39 of Earnings for every $100 of Shareholders' Equity.
Figures in USD. Fiscal year ends in December
20112012201320142015
Net Income 6.27B 6.30B 4.52B 11.93B 4.46B
divided by
Stockholders' Equity 54.52B 53.02B 49.77B 48.65B 44.68B
Return on Equity 11.50% 11.88% 9.08% 24.53% 9.98%

Excellent Business Performance over the past 10 years

MRK has been able to maintain profitability in good times and bad. This could mean MRK has an extremely strong business or has the ability to scale down costs when needed. This should be a fairly resilient business, but double check for future sustainability by looking at its Risk Factors in the Annual Report.

MRK has created positive free cash flow for 9 or more of the past 10 years.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Free Cash Flow 5.79B 5.99B 5.27B 1.93B 9.14B 10.66B 8.07B 10.11B 5.54B 11.14B

Weak Balance Sheet

MRK's financial position is not ideal. The key is to check whether MRK is using debt to fuel its growth and the sustainability of that tendency. Highly capital intensive businesses (see Economic Moat) follow this route, which can deeply impact the future prospects of the business.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Cash 8.71B 8.23B 5.49B 9.60B 12.20B 14.97B 16.14B 17.49B 15.72B 13.43B
Current Assets 15.23B 15.05B 19.30B 28.43B 29.06B 33.18B 34.86B 35.69B 33.17B 29.76B
Total Assets 44.57B 48.35B 47.20B 112.09B 105.78B 105.13B 106.13B 105.65B 98.34B 101.78B
Current Liabilities 12.72B 12.26B 14.32B 15.75B 15.64B 16.25B 18.35B 17.87B 18.77B 19.20B
Total Liabilities 27.01B 30.17B 28.44B 53.03B 51.41B 50.61B 53.11B 55.88B 49.69B 57.10B
Stockholder' Equity 17.56B 18.18B 18.76B 59.06B 54.38B 54.52B 53.02B 49.77B 48.65B 44.68B
Current Ratio 1.20 1.23 1.35 1.80 1.86 2.04 1.90 2.00 1.77 1.55
TL-to-TA 0.61 0.62 0.60 0.47 0.49 0.48 0.50 0.53 0.51 0.56

Low or No Reinvestment of Profits over the past 10 years

MRK has either been retaining a small amount of their earnings or has done so inconsistently. A lack of consistency could be due to MRK operating at a loss or them having such a strong economic moat they feel comfortable spending profits on growth. Be wary of future prospects and if applicable, inspect the moat's sustainability.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Retained Earnings 39.10B 39.14B 43.70B 41.40B 37.54B 38.99B 39.99B 39.26B 46.02B 45.35B
Retained Earnings Growth - 0.12% 11.65% -5.25% -9.34% 3.87% 2.55% -1.82% 17.23% -1.46%

Inconsistent Net Profit Margins over the past 10 years

MRK potentially has a competitive advantage, however inconsistent profit margins are a cause for concern. Look at reasons for this inconsistency to determine the likelihood of future sustainability.

$19.10 of every $100 of Revenue have been pure profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Net Income 4.43B 3.28B 7.81B 12.90B 861.00M 6.27B 6.30B 4.52B 11.93B 4.46B
divided by
Revenue 22.64B 24.20B 23.85B 27.43B 45.99B 48.05B 47.27B 44.03B 42.24B 39.50B
Net Profit Margin 19.59% 13.54% 32.74% 47.04% 1.87% 13.05% 13.33% 10.26% 28.25% 11.29%

Strong Pricing Power over the past 10 years

MRK has maintained substantial gross margins, suggesting that they have been able to set prices without consideration of the cost of goods sold. This potentially leaves flexibility in inflationary environments to raise prices on consumers and maintain profitability.

$68.34 of every $100 worth of sales have been Gross Profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Gross Profit 16.63B 18.06B 18.27B 18.41B 27.59B 39.58B 30.82B 27.08B 25.47B 24.56B
divided by
Revenue 22.64B 24.20B 23.85B 27.43B 45.99B 48.05B 47.27B 44.03B 42.24B 39.50B
Gross Margin 73.49% 74.62% 76.59% 67.12% 60.00% 82.38% 65.21% 61.50% 60.30% 62.19%

Medium Capital Intensity over the past 10 years

MRK has used a reasonable amount of their financial resources to invest in facilities and equipment required to produce its goods and services. This isn't perfect, but it shouldn't be an area of concern unless this number is strongly trending upwards.

41.68% of Profits are being spent on Capital Expenditures, like Property, Plant, & Equipment, required to run the business.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Capital Expenditure 980.20M 1.01B 1.30B 1.46B 1.68B 1.72B 1.95B 1.55B 2.32B 1.28B
divided by
Net Income 4.43B 3.28B 7.81B 12.90B 861.00M 6.27B 6.30B 4.52B 11.93B 4.46B
Capital Expenditure Ratio 22.11% 30.87% 16.63% 11.32% 194.89% 27.47% 31.02% 34.27% 19.42% 28.77%

Very Strong Dividend History over the past 10 years

MRK has consistently distributed a dividend for at least the past 10 years. Such a long dividend history suggests MRK is very established in its market and that its dividend distribution is likely to continue for a significant period of time.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Dividend Paid 3.32B 3.31B 3.28B 3.48B 4.85B 4.81B 5.24B 5.28B 5.25B 5.12B
divided by
Shares Outstanding 2.19B 2.19B 2.15B 2.27B 3.12B 3.09B 3.08B 3.00B 2.93B 2.84B
Dividend Paid Per Share 1.52 1.51 1.53 1.53 1.56 1.55 1.70 1.76 1.79 1.80
Price at Year End 35.15 48.77 25.70 33.91 34.38 37.70 40.64 49.94 57.65 53.25
Dividend Yield 4.32% 3.09% 5.95% 4.51% 4.52% 4.12% 4.19% 3.53% 3.11% 3.38%

Strong History of Stock Buybacks over the past 10 years

MRK has a strong history of delivering increased value for shareholders in the form of stock buybacks. These have helped improve financial metrics and increase each shareholders' relative ownership stake in the company, due to fewer shares outstanding and holding the same number of shares.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Shares Outstanding 2.19B 2.19B 2.15B 2.27B 3.12B 3.09B 3.08B 3.00B 2.93B 2.84B
Stock Bought Back - -0.24% 2.22% -5.63% -27.14% 0.84% 0.59% 2.67% 2.32% 3.06%
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Discussion
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Posted by johnh  (on April 2, 2012)
Really inconsistent growth in FCF. The biggest concern on MRK's horizon is Singulair. It's one of their biggest selling drugs ($5.5 billion in sales in the past year) and the patent will expire in Q4 2012.