Based on Merck & Co., Inc.’s (NYSE:MRK) earnings update in March 2019, analysts seem cautiously optimistic, as a 26% increase in profits is expected in the upcoming year, relative to the past 5-year average growth rate of -16%. Presently, with latest-twelve-month earnings at US$6.2b, we should see this growing to US$7.9b by 2020. Below is a brief commentary around Merck’s earnings outlook going forward, which may give you a sense of market sentiment for the company. For those interested in more of an analysis of the company, you can research its fundamentals here.
Exciting times ahead?
Longer term expectations from the 14 analysts covering MRK’s stock is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To get an idea of the overall earnings growth trend for MRK, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
From the current net income level of US$6.2b and the final forecast of US$11b by 2022, the annual rate of growth for MRK’s earnings is 11%. EPS reaches $5.93 in the final year of forecast compared to the current $2.33 EPS today. In 2022, MRK’s profit margin will have expanded from 15% to 21%.
Future outlook is only one aspect when you’re building an investment case for a stock. For Merck, I’ve put together three important aspects you should look at:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is Merck worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Merck is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Merck? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.