Merck Stock Analysis – Will the Price Go Up?

Merck Stock Analysis (MRK)

I don’t remember covering any pharmaceutical companies and I came across one that’s established and thought that it’s a good company to cover. So here’s my Merck Stock Analysis.

Enjoy and remember to leave a comment or question. I am always happy to answer or hear from you.

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Merck Stock Analysis – Business Snapshot

Merck Stock Analysis - Business Snapshot
Merck Stock Analysis – Business Snapshot

Merck is a pharmaceutical giant that’s truly global and it’s an established brand name. Believe it or not, Merck has been around since 1668 (wow! that’s a really long time ago) and was first established in the US in 1891. This is one of those rare companies with a long history and with a solid line of product offering. I have a good feeling about this one… but feeling counts for nothing. In the end, it’s all about making an informed investment decision based on Financial data. So let’s go…


Merck Stock Analysis – Earnings Per Share

Firstly, let’s take a look at Merck financial and let’s start by putting it through our 1st filter which is on the Earnings per share.

Merck Stock Analysis - Earnings Per Share History
Merck Stock Analysis – Earnings Per Share History

In the past 10 years, Merck did not have a losing year. On its own, that’s impressive enough if you appreciate how hard it is for a company not to have a losing year especially in 2008. EPS look stable except for a pretty significant drop in 2010 and since then the company earnings have been holding quite well. It does not seem like Merck has grown its EPS in the past 10 years. From this, I certainly won’t be looking at Merck as a growth stock. Instead perhaps as a dividend stock or from the P/B angle…


Merck Stock Analysis – Debt Equity Ratio

Alibaba Stock Analysis - Debt Equity Ratio
Tesla Stock Analysis – Debt Equity Ratio Chart

Decreasing D/E ratio! It’s a good sign. Moreover, at 0.25 it has passed my filter of 0.50.


Merck Stock Analysis – Return on Equity

Merck Stock Analysis - 10 Year Return on Equity
Merck Stock Analysis – 10 year Return on Equity Track Record

Not the most impressive ROE I have seen but it’s relatively stable and that we can accept at 9.52%.


Merck Stock Analysis – Operating Cash Flow

Merck Stock Analysis - Operating Cash FlowMerck Stock Analysis – Operating Cash Flow

Any company with a growing operating cashflow is a sign of a company that’s growing in strength… well, not always but it’s a good sign. And Merck is showing that strength in their operating cash flow.


Merck Stock Analysis – Fair Valuation

 

Merck is certainly not a growth stock and will not be growing fast list some of the other companies like Google or Tesla. It’s a matured giant and it’s stable. I would classify Merck more like a defensive stock or a dividend stock. Less risk and less volatile and I strongly recommend a percentage of your portfolio in defensive stocks. Merck is certainly worth investing in but the question is always the same… at what price is fair value? Below is my calculation…

Merck Stock Analysis - Fair ValuationMerck Stock Analysis – Fair Valuation

At the point of this writing, Merck is priced at about $57… just slightly below what I think is fair price. Which means… I think it’s a buy now. This is a defensive position and please do not expect price to skyrocket on this one. If you do, you will end up disappointed and probably get angry with my recommendation. It’s not going to fly but it’s going to keep paying you good dividends.

As usual, you are the commander of your own financial ship, you ultimately decide your destiny.

Good luck and please leave a comment below as I love to hear from you.

William

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