Merck & Co. MRK
What does Merck & Co. do?
Merck & Co. is a globally active pharmaceutical company based in the US. The company develops, produces and markets prescription medicines and vaccines for human health as well as animal health products. The focus is on oncology, vaccines, infectious diseases, cardiovascular diseases and hospital medicines. The best-known brands include the PD-1 antibody Keytruda, the HPV vaccine series Gardasil, and products such as Welireg, Winrevair and Bridion.
Merck generates revenue mainly from wholesalers, pharmacies, hospitals, healthcare systems and government vaccination programs. The pharmaceutical business is complemented by the animal health division, which serves livestock, companion animals and aquaculture. In competition, Merck is among the largest research-based drugmakers worldwide and competes with companies such as Pfizer, Bristol Myers Squibb, Roche and AstraZeneca. Its position is based on an extensive research pipeline, patent protection, regulatory expertise and global distribution structures. At the same time, earnings are strongly tied to individual blockbuster products. Confusion with the German Merck KGaA should be avoided, as they are separate companies.
Score profile
Rank vs. Drug Manufacturers - General (15 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, Merck & Co. ranks in the middle in the group Drug Manufacturers - General (4.7/10). On growth, the company ranks below average in the group Drug Manufacturers - General (3.6/10). On valuation (higher = cheaper), the stock ranks in the middle in the group Drug Manufacturers - General (4.1/10). On financial strength, Merck & Co. ranks in the middle in the group Drug Manufacturers - General (4.4/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 16.5x | 16.4x | better than 43 % |
| Trailing P/E | 149.5x | 32.3x | better than 4 % |
| PEG ratio | 3.6x | 3.3x | better than 39 % |
| EV/EBITDA | 13.9x | 13.4x | better than 43 % |
| Price/sales | 5.4x | 4.4x | better than 37 % |
| Price/book | 8.1x | 6.8x | better than 46 % |
| Revenue growth | 4.7% | 5.6% | better than 40 % |
| Earnings growth | -12.0% | -5.3% | better than 32 % |
| Gross margin | 75.2% | 74.2% | better than 63 % |
| Operating margin | 35.2% | 34.3% | better than 57 % |
| Net margin | 3.6% | 15.7% | better than 30 % |
| Return on equity | 5.1% | 20.0% | better than 37 % |
| Debt/equity | 119.9% | 119.9% | better than 50 % |
| Current ratio | 1.4x | 1.4x | better than 40 % |
| Free cash flow yield | 3.8% | 4.4% | better than 43 % |
| Dividend yield | 2.3% | 2.2% | – |
| Payout ratio | 343.4% | 60.8% | – |
| Beta | 0.12 | 0.37 | – |
Valuation: what is Merck & Co. worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give Merck & Co. a model range of 111.46 USD to 179.48 USD per share.
26 analysts, average rating “Buy”, average price target 161.53 USD (+9.1%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- Revenue depends largely on the success of a few high-selling drugs, particularly in oncology.
- New approvals, indication expansions and successful clinical trials secure the long-term supply of patent-protected products.
- Vaccine demand and government vaccination recommendations shape growth in the vaccine division and the utilization of production.
Risks
- The expiration of patents leads to generic and biosimilar competition and can put significant pressure on major revenue contributors.
- Price regulation, negotiations with government programs and political intervention in drug pricing weigh on margins.
- Failures in clinical trials or approval procedures can impair the value of high research investments and weaken the pipeline.
What to look for with Merck & Co.
The share of the top-selling product in total revenue shows the dependence on individual blockbusters and thus the risk at patent expiration.