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General information
Merck & Co., Inc. is a global health care company that delivers health solutions through its prescription medicines, vaccines, biologic therapies, animal health, and consumer care products, which it markets directly and through its joint ventures. The Company has operations in pharmaceutical, animal health, and consumer care.
  • Bad financial results growth rate -6.9% (average between last period year over year growth for revenue and EBITDA), there is slowdown compared to average historical growth rates (12.5%)
  • Dividend yield for the last twelve months 3.2%
  • Free cash flow yield 5.3% (LTM)
  • Share price is 43.0% higher than minimum and 17.2% lower than maximum for the last 3 years
  • The company is undervalued by EV / LTM EBITDA multiple compared to target level (13.5x vs 17.4x)
  • Fundamental value created in LTM (estimate) -1.1%
Key Financials
Ticker: MRK
Share price, USD: 76.18
Common stocks: 2 545 984 142

Dividend Yield:  3.2%
FCF Yield LTM: 5.3%
EV / LTM EBITDA: 13.5x
Last revenue growth (y/y):  -7.6%
Last growth of EBITDA (y/y):  -6.2%
Historical revenue growth:  5.8%
Historical growth of EBITDA:  19.1%
Target EV / EBITDA (hist 75% percentile): 17.4x
Fundamental value created in LTM: -1.1%
EV / LTM EBITDA mutiple calculation
Market Cap ($m): 193 953
Net Debt ($m): 19 873
EV (Enterprise Value): 213 826
EBITDA LTM ($m): 15 813
EV / LTM EBITDA: 13.5x

Revenue and EBITDA

Quarterly values ($m)

Change (y/y)

Cash Flow

Free Cash Flow ($m)

Net Debt / Cash and Equivalents ($m)

Share price and dividends

Share price

Payment USD per share

Multiple and potential

EV / LTM EBITDA and 75% percentile

Potential dynamics

Value Creation

Fundamental Value Creation is calculated as ratio of value created in the last period to current market cap of the company.

The fundamental value can be created in two ways:
• cash generation in form of dividend payments or debt reduction or share buybacks
growth of the company enterprise value through improving financial results

The growth of enterprise value in the last period is estimated as product of:
• annualized increase of EBITDA in the last reporting period year over year
• relevant EV/EBITDA multiple (average between actual EV/EBITDA for the company and average general level of 10.0x is applied)

Parameter
#
Formula
Value
    
    
            EBITDA (pre LTM Q)
(1)
4 454
            EBITDA (last Q)
(2)
4 177
            EBITDA LTM
(3)
15 813
    
    
        EBITDA LTM / last Q
(4)
(3) / (2)
3.786
    Gain of EBITDA (mln $)
(5)
( (2)-(1) ) * (4)
-1 049
    
    
            EV
(6)
215 379
        Mult
(7)
(6) / (3)
13.6x
        Mult common
(8)
const
10.0x
    Mult avg
(9)
avgerage
11.8x
    
    
    Equity+
(10)
(5) * (9)
-12 385
    FCF LTM
(11)
10 270
    
    
Value+
(12)
(10) + (11)
-2 115
Cap
(13)
193 953
    
    
Fundamental value creation
(14)
(12) / (13)
-1.1%

Potential

EBITDA LTM       15 813
 
EBITDA E       15 540
Mult aim       17.4x
 
EV E       270 568
NetDebt corr       18 021
 
Cap E       252 547
Cap       193 953
Growth potential            30.2%