A strong performer from today's morning trading session is Merck & Company, whose shares rose 1.1% to $110.18 per share. For those of you thinking about investing in the stock, here is a brief value analysis of the stock using the company's basic fundamental ratios.
Merck & Company's Valuation Is in Line With Its Sector Averages:
Merck & Co., Inc. operates as a healthcare company worldwide. The company belongs to the Health Care sector, which has an average price to earnings (P/E) ratio of 24.45 and an average price to book (P/B) ratio of 4.16. In contrast, Merck & Company has a trailing 12 month P/E ratio of 21.5 and a P/B ratio of 5.97.
Merck & Company's PEG ratio is 1.96, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Growing Revenues With Increasing Reinvestment in the Business:
| 2019-12-31 | 2020-12-31 | 2021-12-31 | 2022-12-31 | |
|---|---|---|---|---|
| Revenue (MM) | $46,840 | $47,994 | $48,704 | $59,283 |
| Gross Margins | 69.9% | 67.7% | 72.0% | 70.6% |
| Operating Margins | 26.1% | 17.7% | 27.1% | 30.8% |
| Net Margins | 21.01% | 14.72% | 26.79% | 24.49% |
| Net Income (MM) | $9,843 | $7,067 | $13,049 | $14,519 |
| Net Interest Expense (MM) | -619 | -772 | -770 | -805 |
| Net Interest Expense (MM) | -$619 | -$772 | -$770 | -$805 |
| Depreciation & Amort. (MM) | -$3,652 | -$3,625 | -$3,214 | -$3,909 |
| Earnings Per Share | $3.81 | $2.78 | $5.14 | $5.12 |
| EPS Growth | n/a | -27.03% | 84.89% | -0.39% |
| Diluted Shares (MM) | 2,580 | 2,541 | 2,538 | 2,537 |
| Free Cash Flow (MM) | $9,967 | $5,569 | $9,661 | $14,707 |
| Capital Expenditures (MM) | -$3,473 | -$4,684 | -$4,448 | -$4,388 |
| Net Current Assets (MM) | -$30,913 | -$38,420 | -$37,171 | -$27,380 |
| Current Ratio | 1.24 | 1.02 | 1.27 | 1.47 |
| Long Term Debt (MM) | $22,736 | $25,360 | $30,690 | $28,745 |
| Net Debt / EBITDA | 1.05 | 1.8 | 1.35 | 0.85 |
Merck & Company has growing revenues and increasing reinvestment in the business, strong margins with a stable trend, and low leverage. The company also benefits from wider gross margins than its peer group, positive EPS growth, and consistent free cash flow. Furthermore, Merck & Company has just enough current assets to cover current liabilities.
