Company: Merck (there is a Merck in the USA also but this analysis only concerns the German one)
ISIN DE0006599905 | WKN 659990
Business: A German bio pharmaceutical and chemical company. They are divided into three business sectors: Healthcare (Merck Serono, Consumer Health, Allergopharma and Biosimilars), Life Science (Merck Millipore) and the third one is Performance Materials.
Active: World wide with employees in 65 countries. (found no new data)
P/E: 31.2
Here you can find the previous analysis of Merck 2015.
The P/E of Merck is an outrage with 31.2 but the P/B is, in comparison, a bit more acceptable with 2.7 which in the end gives us a clear no go from Graham. The earnings to sales look ok with 9% but the ROE is not good with only 8.7%. The book to debt ratio is also not very good with 0.5.
In the last five years they have had an excellent yearly revenue growth rate of 5.3% which gives us a motivated P/E of 16 to 20 which means that Merck is today overvalued by the market.
They spend an insane amount on R&D since it correspond to over 150% of their earnings.
On top of things they pay a silly dividend in the size of 1.3% which still corresponds to over 40% of their earnings.
Conclusion: Graham as well as I say no to Merck. the P/E is too high, the book to debt is too low, the ROE is too low and the dividend is useless. Great company and there is a price for everything but we are not there with Merck today.
If this analysis is outdated then you can request a new one.
2 comments:
What is the ticker for this company? Is this the company that recently bought Sigma-Aldrich? Thank you.
/Maria
Hi Maria,
Merck is always a complication due to that there is a US one and a German one. All of them have at least in Google Finance the ticker MRK but the German one goes under FRA:MRK. Yes, they did indeed make a large investment in Sigma-Aldrich not that long ago.
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