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MRK

Merck NYSE:MRK Stock Report

Last Price

US$91.02

Market Cap

US$230.6b

7D

4.1%

1Y

18.6%

Updated

12 Aug, 2022

Data

Company Financials +
MRK fundamental analysis
Snowflake Score
Valuation5/6
Future Growth2/6
Past Performance6/6
Financial Health3/6
Dividends5/6

MRK Stock Overview

Merck & Co., Inc. operates as a healthcare company worldwide.

Merck & Co., Inc. Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Merck
Historical stock prices
Current Share PriceUS$91.02
52 Week HighUS$95.72
52 Week LowUS$70.89
Beta0.32
1 Month Change-2.93%
3 Month Change0.67%
1 Year Change18.64%
3 Year Change7.01%
5 Year Change48.02%
Change since IPO594.59%

Recent News & Updates

Aug 02

Merck: Strong Oncology Pipeline

Merck has an outstanding oncology portfolio that will drive growth in the foreseeable future. Strong fundamentals and cash position ensure Merck's growth will be well supported. Valuation makes Merck stock look attractive right now. Investment Thesis Merck & Co., Inc. (MRK) is a global health care company that develops, manufactures, and sells medicines, vaccines, biologic therapies, and animal health products. They have been a premier health care company for long time, and shown well-managed growth backed by a strong pipeline. Their superb technology and patent protection provides a solid economic moat, and they are maintaining their edge through healthy investment in R&D and key acquisitions. I believe Merck is a great investment option because: Their oncology portfolio is one of the strongest in the industry, and it will drive growth in the future; Merck has a strong balance sheet with a large amount of cash and strong liquidity. This strong fundamentals will enable them to achieve growth targets; and Looking at the company's intrinsic value, the stock price is clearly undervalued, presenting a great opportunity for investors. Formidable Oncology Portfolio Merck has several blockbuster oncology treatments in the market that are already generating billions of dollar. The sales of KEYTRUDA, their flagship drug, grew 30% YoY to $5.3B in 2Q 2022, and Lynparza (17% growth) and Lenvima (33% growth) also showed strong performance. Even so, Merck is aggressively working to expand their oncology portfolio. Merck is currently in talks to buy cancer-focused biotechnology company Seagen (SGEN) for $40 billion, which would be Merck's second major acquisition since 2009. If this deal goes through, this would further boost Merck's oncology portfolio by adding four approved drugs and several late stage clinical candidates. Merck also just inked a much smaller $290 million collaboration with Orion Corporation for a Phase 2 steroid inhibitor for prostate cancer. Merck has the option to convert this deal into a global exclusive license if development goes well. Internal R&D efforts are focused on straight up developing new drugs, as well as targeted towards identifying a combination of therapies that give better outcomes for cancer treatment. At an ASCO investor event, Merck shared an update of current progress and the plans for the future, and the pipeline was pretty impressive. Merck's Oncology Portfolio and Pipeline (Merck Investor Relations) Several noticeable results included the following: KEYTRUDA reduced the risk of distant metastasis or death by 36% as an adjuvant treatment option for stage II melanoma. The size of the melanoma therapeutics market is estimated at $3.45 B in 2022, and is expected to grow at 15.8% per year. WELIREG for certain Von Hippel-Lindau ((VHL)) disease-associated tumors was launched successfully. Four phase 3 trials are on-going, with primary completion dates beginning in 2025. More than 80 potential approvals are expected through 2028, which will establish Merck as a leader in the oncology space. Merck's patent exclusivity on KEYTRUDA expires in 2028, but with this formidable portfolio and pipeline, I expect that Merck will sustain its growth well beyond that. Strong Fundamentals Merck has a very strong balance sheet and cash-generating ability. They generated operating cash flow of $17.2 B (free cash flow of $10.2 B), and hold $8.9 B on their balance sheet. Their current ratio (1.4x) and quick ratio (0.9x) are at the upper end among their pharmaceutical competitors - Pfizer (PFE), Bristol Myers Squibb (BMY), etc. Not only that, their profitability metrics are outstanding. EBIT margin (35.4%), EBITDA margin (42.0%), and net income margin (29.0%) are well above the industry average. Such strong profitability represents the economic moat arising from superb technology and patent protection. I expect them to maintain this strength well into the future. Also, the strong balance sheet and profitability will ensure that Merck has plenty of resources to support their R&D and key acquisitions in the future. Favorable Valuation Looking at the valuation metrics, Merck's stock price is undervalued, and it is presenting a great opportunity for investors to grab the stock. The P/E ratio of 13.6x is significantly lower than both their own historical value (39.2x) and sector median (27.9x). EV/EBITDA value (10.4x) is also lower than historical average (12.8x) and sector median (16.4x). Given their leadership position in the pharmaceutical industry and their impressive pipeline, I expect the market will realize the mispricing soon and the stock price will rise accordingly. MRK PE Ratio data by YCharts Intrinsic Value Estimation I used the discounted cash flow ("DCF") model to estimate the intrinsic value of Merck. For the estimation, I utilized current operating cash flow ($17.2 B) and the current WACC of 8.0% as the discount rate. For the base case, I assumed cash flow growth of 8% (5 year average revenue growth) for the next 5 years, and zero growth afterward (zero terminal growth). For the bullish and very bullish case, I assumed cash flow growth of 10% and 13%, respectively, for the next 5 years and zero growth afterward. The estimation revealed that the current stock price represents 15-30% upside. Given their strong portfolio and pipeline of drugs, I expect Merck to achieve this upside with ease. Their strong fundamentals and profitability will ensure they have the resources to meet their growth plan. Price Target Upside Base Case $100.79 13% Bullish Case $108.89 22% Very Bullish Case $122.11 37% The assumptions and data used for the price target estimation are summarized below: WACC: 8.0% Cash Flow Growth Rate: 8% (Base Case), 10% (Bullish Case), 13% (Very Bullish Case) Current Cash Flow: $17.2 B Current Stock Price: $89.34 (07/29/22) Tax rate: 20%. Cappuccino Stock Rating Weighting MRK Economic Moat Strength 30% 5 Financial Strength 30% 4 Growth Rate vs. Sector 15% 4 Margin of Safety 15% 4 Sector Outlook 10% 4 Overall 4.3 Economic Moat Strength

Shareholder Returns

MRKUS PharmaceuticalsUS Market
7D4.1%-0.6%1.3%
1Y18.6%0.7%-11.7%

Return vs Industry: MRK exceeded the US Pharmaceuticals industry which returned 0.7% over the past year.

Return vs Market: MRK exceeded the US Market which returned -11.7% over the past year.

Price Volatility

Is MRK's price volatile compared to industry and market?
MRK volatility
MRK Average Weekly Movement2.9%
Pharmaceuticals Industry Average Movement11.7%
Market Average Movement7.8%
10% most volatile stocks in US Market16.9%
10% least volatile stocks in US Market3.2%

Stable Share Price: MRK is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 3% a week.

Volatility Over Time: MRK's weekly volatility (3%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
189167,500Rob Davishttps://www.merck.com

Merck & Co., Inc. operates as a healthcare company worldwide. It operates through two segments, Pharmaceutical and Animal Health. The Pharmaceutical segment offers human health pharmaceutical products in the areas of oncology, hospital acute care, immunology, neuroscience, virology, cardiovascular, and diabetes, as well as vaccine products, such as preventive pediatric, adolescent, and adult vaccines.

Merck & Co., Inc. Fundamentals Summary

How do Merck's earnings and revenue compare to its market cap?
MRK fundamental statistics
Market CapUS$230.58b
Earnings (TTM)US$16.64b
Revenue (TTM)US$57.17b

13.9x

P/E Ratio

4.0x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
MRK income statement (TTM)
RevenueUS$57.17b
Cost of RevenueUS$16.71b
Gross ProfitUS$40.46b
Other ExpensesUS$23.82b
EarningsUS$16.64b

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

Oct 27, 2022

Earnings per share (EPS)6.57
Gross Margin70.77%
Net Profit Margin29.11%
Debt/Equity Ratio73.1%

How did MRK perform over the long term?

See historical performance and comparison

Dividends

3.0%

Current Dividend Yield

41%

Payout Ratio

Does MRK pay a reliable dividends?

See MRK dividend history and benchmarks
When do you need to buy MRK by to receive an upcoming dividend?
Merck dividend dates
Ex Dividend DateSep 14 2022
Dividend Pay DateOct 07 2022
Days until Ex dividend32 days
Days until Dividend pay date55 days

Does MRK pay a reliable dividends?

See MRK dividend history and benchmarks