Merck & Co., Inc.

MRK

Pharmaceutical Preparations

Mkt Cap

$254.2B

PE

55.16

Debt

$34.86B

Cash

$8.669B

EV

$280.3B

FCF

$13.17B

Market Cap

$254.2B

P/E Ratio

55.16

Debt

$34.86B

Cash

$8.669B

EV

$280.3B

FCF

$13.17B

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. The Animal Health segment discovers, develops, manufactures, and markets veterinary pharmaceuticals, vaccines, and health management solutions and services, as well as digitally connected identification, traceability, and monitoring products. The company serves drug wholesalers and retailers, hospitals, and government agencies; managed health care providers, such as health maintenance organizations, pharmacy benefit managers, and other institutions; and physicians and physician distributors, veterinarians, and animal producers. It has collaborations with AstraZeneca PLC; Bayer AG; Eisai Co., Ltd.; Ridgeback Biotherapeutics LP; and Gilead Sciences, Inc. to jointly develop and commercialize long-acting treatments in HIV. Merck & Co., Inc. was founded in 1891 and is headquartered in Rahway, New Jersey.

Sector

10-Q
6/30/23
10-Q
3/31/23
10-K
12/31/22
10-Q
9/30/22
10-Q
6/30/22
10-Q
3/31/22
10-K
12/31/21
10-Q
9/30/21
10-Q
6/30/21
10-Q
3/31/21
10-K
12/31/20
10-Q
9/30/20
10-Q
6/30/20
10-Q
3/31/20
10-K
12/31/19
10-Q
9/30/19
10-Q
6/30/19
10-Q
3/31/19
10-K
12/31/18
10-Q
9/30/18
10-Q
6/30/18
10-Q
3/31/18
10-K
12/31/17

DCF

Discounted Cash Flow Valuation of Merck & Co., Inc.

Calculate

Growth Years

Growth

Start

End

Discount

Start

End

Multiple

g\r	+10%	+11%	+12%	+13%	+14%
0%	10	9	8	8	7
+1%	11	10	9	8	8
+2%	13	11	10	9	8
+3%	14	13	11	10	9
+4%	17	14	12	11	10

Years	0	1	2	3	4	5	6	7	8	9	10	TV
FCF	$13.17B	$13.89B	$14.65B	$15.44B	$16.27B	$17.13B	$18.02B	$18.96B	$19.92B	$20.93B	$21.98B	$219.8B
DCF		$12.08B	$11.08B	$10.15B	$9.301B	$8.515B	$7.792B	$7.126B	$6.513B	$5.95B	$5.433B	$54.33B
Value	$138.3B

Chart P/E ratio

In the chart Earnings are multiplied by this value.

Earnings Growth 7.3%

Earnings Stability 8.4%

Competitiveness and MOAT

High margins render the company resilient under dire circumstances, hence able to drive competitors out or acquire them. ROE and ROA measure the average flow generated by each invested dollar. Their marginal value is a forecast of future growth, and it is considered by Buffett and Munger the most important single indicator.

The Net Margin is too low to guarantee profitability in case of higher costs or higher interest rates. Furthermore lower margins cause higher earnings’ volatility.

Over time the ROA has been increasing indicating a higher marginal ROA with respect to the calculated one, giving a good sign for continued growth.

Years	12-2014	12-2015	12-2016	12-2017	12-2018	12-2019	12-2020	12-2021	12-2022	TTM
Net Margin	28%	11%	9.8%	6%	15%	21%	15%	27%	24%	7.8%
ROA	18%	5.3%	4.9%	7.4%	11%	14%	9.6%	13%	15%	7%
ROE	24%	9.9%	9.7%	6.9%	23%	38%	28%	34%	32%	11%

What is the average Net Margin?

The average Net Margin over the past 5 years is +17.92%.

What is the trend of Net Margin?

The trend of Net Margin over the past 5 years is +3.51%.

What is the average Return on Assets (ROA)?

The average ROA over the past 5 years is +11.55%.

What is the trend of Return on Assets (ROA)?

The trend of ROA over the past 5 years is +1.2%.

What is the average Return on Equity (ROE)?

The average ROE over the past 5 years is +26.84%.

What is the trend of Return on Equity (ROE)?

The trend of ROE over the past 5 years is +4.18%.

Safety & Stabiliy

Being debt the number one cause of investment losses and company death, the ratio Debt/FCF is of utmost importance to guarantee safety. On the other hand the Graham’s stability measures the drawdown of earnings, hence indicating the reliability of the flow generated by the company.

Under the assumption that FCF does not diminish and debt does not increase, the current years to repay the debt are acceptable.

The Graham’s stability indicate a relevant drawdown, consider checking when it has occured and why.

Years	12-2014	12-2015	12-2016	12-2017	12-2018	12-2019	12-2020	12-2021	12-2022	TTM
Debt FCF	3.27	2.38	2.84	5.35	3.02	2.64	5.71	3.82	2.09	2.65
Debt Equity	0.44	0.59	0.62	0.71	0.93	1.01	1.25	0.87	0.67	0.84
MIN
Graham Stability	-	-	57%	35%	100%	100%	100%	100%	100%	35%

What is the Debt/FCF?

The Debt/FCF trailing twelve month is 2.65.

What is the trend of Debt/FCF?

The trend of Debt/FCF over the past 5 years is -0.31.

What is the Graham’s Stability?

Graham’s Stability measure stands at 0.35.

Growth

Growth can be dangerous when forecasting, simply projecting the current growth is in general wrong. A company passes through multiple phases, from being young and unprofitable, to the first periods of profitability and high growth, until it arrives at a period of regime with limited growth. Identifying in which phase the company is in may help forecasting.

Earnings growth has not been increasing in the past years.

Years	12-2015	12-2017	12-2019	12-2021	Trend
Revenue	6%	8.1%	8.2%	22%	2.3%
Net Income	18%	43%	14%	11%	-2.2%
Stockholders Equity	0.41%	5.9%	21%	20%	5.2%
FCF	4.1%	26%	14%	70%	6.6%

What is the 5 year Revenue CAGR?

The Revenue CAGR over the past 5 years is +8.12%.

What is the trend of Revenue growth?

The trend of Revenue growth rate over the past 5 years is +2.34%.

What is the 5 year Earnings CAGR?

The Earnings CAGR over the past 5 years is +43.4%.

What is the trend of Earnings growth?

The trend of Earnings growth rate over the past 5 years is -2.18%.

What is the 5 year Equity CAGR?

The Equity CAGR over the past 5 years is +5.91%.

What is the trend of Equity growth?

The trend of Equity growth rate over the past 5 years is +5.19%.

What is the 5 year FCF CAGR?

The FCF CAGR over the past 5 years is +26.4%.

What is the trend of FCF growth?

The trend of FCF growth rate over the past 5 years is +6.64%.