US Equities Analysis

MRK — Merck & Co.

Research evidence pack

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2. Company Fundamentals

2.1 Competitiveness

Metric Value
Operating Margins 38.6%
Profit Margins 13.59%
Return on Equity 18.94%
Return on Assets 12.58%
Free Float 2.47B
Dividend Yield 2.64%
Short Int % Utilisation 1.24%

2.2 Growth

Metric Value
Revenue Growth 4.9%
Free Cash Flow 14.05B
EBITDA 11.44 (Ratio)
Enterprise Value 337.6B
EV/Revenue 5.13
EV/EBITDA 11.44

Revenue growth of 4.9% suggests mature or challenged top-line momentum.

2.3 Management

Role Metric
Consensus Rating N/A

2.4 Return

Metric Value
Expected Return (Ann.)* 73.73%
Risk / Std Dev (Ann.)* 27.49%
1-Year Price Return* 66.70%

Latest Market Data (as of 2026-08-14, US Eastern time):

Metric Value
Last Price $135.84
52-Week Range $77.58 – $135.97
Observation Count 251 trading days

The return and risk statistics use daily adjusted closes from the retrieved one-year series and annualise daily moments using 252 trading days. The last price is the latest regular-market price reported for the stated date. Source: Yahoo Finance market data.

2.5 FCFF DCF Valuation

Valuation basis: This research model follows a five-year, unlevered FCFF DCF. It starts from reported annual operating inputs, forecasts revenue and operating cash conversion under an explicit mechanical policy, discounts FCFF at WACC, applies a Gordon-growth terminal value, and bridges enterprise value to an indicative common-equity value per share. It is an analytical estimate rather than a recommendation or personalised target price.

Step 1 — Forecast Operating Profit and NOPAT

Reported operating input Value
Revenue $65.01B
Prior annual revenue $64.17B
EBIT $22.42B
Tax rate 13.31%
NOPAT = EBIT × (1 − tax rate) $19.44B
Forecast start-growth basis 1.31%
Forecast policy latest reported annual revenue growth, bounded to -10.00% / 15.00%

Step 2 — Calculate FCFF

Current FCFF building block Value
NOPAT $19.44B
Add: depreciation & amortisation $5.84B
Less: capital expenditure -$4.11B
Less/(add): working-capital cash-flow movement -$6.98B
Current unlevered FCFF $14.19B

Explicit FCFF forecast

Forecast year Revenue growth NOPAT D&A Capex Change in NWC FCFF Present value
1 1.31% $19.69B $5.91B -$4.17B -$7.07B $14.38B $14.00B
2 1.61% $20.01B $6.01B -$4.68B -$7.18B $14.16B $13.08B
3 1.91% $20.39B $6.12B -$5.22B -$7.32B $13.98B $12.24B
4 2.20% $20.84B $6.26B -$5.80B -$7.48B $13.83B $11.48B
5 2.50% $21.36B $6.42B -$6.42B -$7.67B $13.70B $10.78B

Step 3 — Determine the Discount Rate (WACC)

WACC input Value
Risk-free rate 4.71%
Equity risk premium assumption 5.50%
Beta 0.21
Cost of equity 5.87%
Pre-tax cost of debt 3.14%
WACC 5.47%
WACC validation requires assumption review

Step 4 — Estimate Terminal Value

Terminal-value input Value
Perpetuity growth rate 2.50%
Terminal value $473.22B
Implied terminal EV / EBITDA 15.24x
Terminal value as % of enterprise value 85.49%

Step 5 — Discount Cash Flows to Enterprise Value

Enterprise-value component Value
Present value of explicit FCFF $61.57B
Present value of terminal value $362.65B
Indicated enterprise value $424.22B
Discounting convention mid-year for explicit FCFF; terminal value discounted at year-end five

Step 6 — Convert Enterprise Value to Equity Value

Equity bridge Value
Indicated enterprise value $424.22B
Less: gross interest-bearing debt $49.34B
Add: cash and equivalents $14.56B
Add: affiliate investments $0.00
Less: minority interests $56.00M
Indicated common equity value $389.39B

Step 7 — Calculate Indicative Value Per Share

Per-share output Value
Shares used 2,507,000,000.00
Share-count basis reported diluted weighted-average shares
Current market price $135.34
DCF indicative value per share $155.32
Indicative value vs. market price 14.76%

Model Integrity Checks

Check Result
Perpetuity growth is below the risk-free rate pass
Perpetuity growth is below WACC pass
WACC is within the configured operating-company range review required
Terminal-year FCFF is positive pass
Terminal capex converges to D&A pass
Terminal-value concentration within review band
Implied price differs from spot by more than 30% within review band

2.6 Investor-Style Research Screen

Educational screen Result
Buffett-inspired cash-quality checks 4/4 evidenced checks
Lynch-inspired balance-and-growth checks 4/4 evidenced checks

Data lineage: Yahoo Finance public market and reported-statement data; retrieval timestamp: 2026-08-18 17:42:28.452216 UTC; latest reported fiscal period: 2025-12-31 00:00:00. Default assumptions: five-year forecast, mid-year discounting for explicit FCFF, a maximum 2.50% perpetuity-growth rate below both WACC and the risk-free rate, historical operating-ratio persistence, and capex convergence to D&A by year five. No sell-side consensus or management guidance is substituted for reported inputs. This is research and analysis only, not personalized financial advice.

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