Merck & Co., Inc. (MRK) stock analysis

P/E above its 5-year median

Merck's P/E of 152.6 is above its own 5-year median of 19.1.

P/E above the industry

Merck's P/E of 152.6 is above the Drugs median of 25.1.

EV/EBITDA against its history

Needs positive EBITDA and price history.

P/B above the industry

Merck's price-to-book of 8.14 is above the Drugs median of 2.29.

Trading above fair value

The share price of $148.05 is above our fair value estimate of $73.36.

Margin of safety under 20%

The price is 102% above fair value, so there is no margin of safety.

Revenue growing under 10% a year

Revenue grew 3.1% a year over the last three fiscal years, short of the 10% we look for.

EPS growing under 10% a year

Diluted EPS grew 8.4% a year over the last three fiscal years.

Earnings growth not accelerating

Net income grew -87.1% over the last twelve months, against a 5-year average of 20.9% a year.

Growing slower than the industry

Revenue grew 4.9% over the last twelve months; the Drugs median is 8.0%.

Guidance lowered

Merck lowered its Full Year 2026 Non-GAAP Other (income) expense, net outlook on Oct 29, 2026.

Gross margin slipping

Gross margin was 71.8% over the last twelve months, against 77.2% a year earlier.

Return on equity under 15%

Return on equity was 5.1% over the last twelve months and averaged 30.8% over five years; we look for 15% on both.

Return on invested capital

Needs operating income and invested capital.

Return on equity above the industry

Merck's return on equity of 5.1% is above the Drugs median of -58.9%.

Earnings grew over 5 years

Net income grew 20.9% a year on average over the last five fiscal years.

Net margin below its 5-year average

Net margin was 3.6% over the last twelve months, against a 5-year average of 21.3%.

Net margin above the industry

Merck's net margin of 3.6% is above the Drugs median of -53.0%.

High debt

Debt is 120% of shareholders' equity, above the 40% we consider low.

Debt falling against equity

Debt to equity fell from 126% five years ago to 120%.

Debt covered by cash flow

Operating cash flow over the last twelve months equals 34.8% of total debt.

Interest coverage

Interest expense is not reported separately.

Short-term assets cover short-term debts

Current assets are 1.35 times current liabilities.

Low bankruptcy risk

The Altman Z-score is 3.79; above 3 is the safe zone and below 1.8 the distress zone.

Pays a dividend

Merck paid dividends worth 2.3% of the share price over the last twelve months.

Yield below Treasuries

The 2.3% yield is below the 4.4% on a 1-year Treasury.

Yield below the top quarter

The top quarter of US dividend payers yield 3.8% or more; Merck yields 2.3%.

Dividend not cut

The dividend per share has not fallen by more than 10% in any of the last 10 fiscal years.

Not covered by earnings

Dividends take 341% of net income, leaving little room.

Covered by free cash flow

Dividends take 56.7% of free cash flow.