Is Merck & Company Inc (MRK) overvalued?
On Equity Rank's model estimate, MRK trades close to its fair value (8% above it). Merck & Company Inc (MRK) last closed at $146.73; the multi-method model fair value is $136.50.
| Price | Model fair value | Price vs model |
|---|---|---|
| $146.73 | $136.50 | 8% above |
What the answer rests on
- 3 of 8 valuation methods put MRK's value above its price and 5 put it below, so the methods disagree.
- To justify today's price, MRK's free cash flow would need to grow about 0.9% a year for ten years (a reverse discounted cash flow). Over the last three years it actually grew -5.6% a year.
- MRK trades at 151.9 times its last year's earnings, against a median of 27.2 for 14 profitable Drug Manufacturer companies.
- Over the past year the price sat below the model fair value on 5% of trading days. The gap ranged from 6% below to 42% above the model fair value.
Read this before relying on it
The model fair value is an estimate from published financial statements. It is not a forecast of where the price goes, and it can be wrong. Within 10% either side we call it close to fair value: valuation models are not precise enough to read more into a smaller gap. Our own lists have no proven edge over the market yet; the live record shows every result, misses included.
Every valuation method behind MRK's fair value · What prices assume · Other companies