Merck & shares fell by -2.9% during the day's morning session, and are now trading at a price of $115.27. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.
Merck &'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 22.94 and an average price to book (P/B) ratio of 3.19. In contrast, Merck & has a trailing 12 month P/E ratio of 32.5 and a P/B ratio of 6.21.
Merck &'s PEG ratio is 5.52, 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.
Generally Positive Cash Flows and Healthy Leverage Levels:
| 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $41,518 | $48,704 | $59,283 | $60,115 | $64,168 | $65,011 |
| Operating Margins | 14% | 28% | 28% | 3% | 31% | 32% |
| Net Margins | 17% | 27% | 24% | 1% | 27% | 28% |
| Net Income (M) | $7,067 | $13,049 | $14,519 | $365 | $17,117 | $18,254 |
| Net Interest Expense (M) | $831 | $806 | $962 | $1,146 | $1,300 | $1,300 |
| Depreciation & Amort. (M) | $1,669 | $1,578 | $1,824 | $1,828 | $2,104 | $3,045 |
| Diluted Shares (M) | 2,541 | 2,538 | 2,542 | 2,547 | 2,541 | 2,507 |
| Earnings Per Share | $2.78 | $5.14 | $5.71 | $0.14 | $6.74 | $7.28 |
| EPS Growth | n/a | 84.89% | 11.09% | -97.55% | 4714.29% | 8.01% |
| Free Cash Flow (M) | $5,824 | $8,674 | $17,946 | $9,143 | $18,096 | $12,360 |
| CAPEX (M) | $4,429 | $4,448 | $1,149 | $3,863 | $3,372 | $4,112 |
| Total Debt (M) | $31,791 | $33,102 | $30,691 | $35,055 | $37,111 | $49,339 |
| Net Debt / EBITDA | 3.15 | 1.62 | 0.99 | 7.59 | 1.08 | 1.44 |
| Current Ratio | 1.02 | 1.27 | 1.47 | 1.25 | 1.36 | 1.54 |
Merck & has strong operating margins with a positive growth rate, generally positive cash flows, and growing revenues and a flat capital expenditure trend. The company also benefits from a strong EPS growth trend, a decent current ratio of 1.54, and healthy leverage levels.
