October 10, 2024
Top 10 Stock Merck (USA) Strong Buy Recommendation
How to read the ranks
For every stock, we judge its performance against its peers and rank it on a scale of 1 to 100. The higher the rank, the better the stock performs than its peers. And, we do this for six investment strategies:
Value - shows how good of a value the stock is. Green is "inexpensive"; red is "expensive".
Growth - shows a company's growth potential. Green is "high growth" expected; red is "tough times ahead".
Safety - relates to the amount of debt a company has. Green is low debt level; red is high debt level.
Combined Financial - this isn't an average of the first three ranks but rather a consolidated view across several financial indicators. Green = good; red = tread carefully.
(NEW) Sentiment - quantifies professional analyst ratings and holdings as well as market pulse. Green = positive sentiment; red = skepticism (Only available to Premium Subscribers).
(NEW) 360° View - the ultimate rating with all financial and non-financial indicators.
Snapshot: Merck (USA) – Top 10 Stock in Dow Jones U.S. Pharmaceuticals Index
Merck (USA) is listed as a top 10 stock on October 10, 2024 in the market index D.J. US Pharmaceutical because of its high performance in at least one of the Obermatt investment strategies. As three out of four consolidated Obermatt Ranks exhibit excellent performance, it is a solid investment where the risk of paying too much for the shares is low. Based on the Obermatt 360° View of 85 (top 85% performer), Obermatt assesses an overall strong buy recommendation for Merck (USA) on October 10, 2024.
Snapshot: Obermatt Ranks
| Country | USA |
| Industry | Pharmaceuticals |
| Index | Dow Jones, Dividends USA, Diversity USA, D.J. US Pharmaceutical, S&P 500 |
| Size class | XX-Large |
When Obermatt identifies the Top 10 stocks in a market, it’s based on a certain investment strategy. The best performing stocks usually aren’t the ones that everyone is talking about (those are often "over-priced" and have low Value ranks).
For each investment strategy, we provide you with more detailed analysis and our recommendation. You see the ranks of the top 10 stocks ranked by that particular investment strategy (360° View, Sentiment, Value, Growth, Safety and Combined Financial Performance).
360° View: Obermatt 360° View Merck (USA) Strong Buy
| 360 METRICS | October 10, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 75 |
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| GROWTH | ||||||||
| GROWTH | 69 |
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| SAFETY | ||||||||
| SAFETY | 48 |
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| SENTIMENT | ||||||||
| SENTIMENT | 71 |
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| 360° VIEW | ||||||||
| 360° VIEW | 85 |
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ANALYSIS: With an Obermatt 360° View of 85 (better than 85% compared with alternatives) for 2024, overall professional sentiment and financial characteristics for the stock Merck (USA) are very positive. The 360° View is based on consolidating four consolidated indicators, with all but one indicator above average for Merck (USA). The consolidated Value Rank has an attractive rank of 75, which means that the share price of Merck (USA) is on the lower side compared with the typical size in indicators such as revenues, profits, and invested capital. This means the stock price is lower than for 75% of alternative stocks in the same industry. The consolidated Growth Rank has a good rank of 69, which means that the company experiences above-average growth momentum when looking at financial metrics such as revenue, profit, and invested capital growth, as well as stock returns. In addition, professional market sentiment is above average compared with other stock investment alternatives with a Sentiment Rank of 71. But the company’s financing is risky with a Safety rank of 48. This means 52% of comparable companies have a safer financing structure than Merck (USA). ...read more
RECOMMENDATION: With a consolidated 360° View of 85, Merck (USA) is better positioned than 85% of all alternative stock investment opportunities based on the Obermatt Method. As three out of four consolidated Obermatt Ranks exhibit excellent performance, such as good value (Value Rank of 75), above-average growth (Growth Rank of 69), and positive market sentiment in the professional investor community (Sentiment Rank of 71), it is a solid stock investment where the risk of paying too much for the shares is limited, and disappointments are less likely, unless information not publicly available. Only the company financing structure is on the riskier side (Safety Rank of 48), but that would also mean better returns for shareholders if things work out well. Good value is sometimes an indication that the company's future is challenging. If they have been growing above average and are still a good value, it may indicate that this will not continue. We recommend evaluating whether the future of Merck (USA) is as difficult as the low price of the stock, despite good growth and positive professional investor sentiment, suggests. Since the professional community is optimistic, you might have less to worry about, and the stock is just not sufficiently visible right now, which may indicate good timing. ...read more
Sentiment Strategy: Professional Market Sentiment for Merck (USA) positive
ANALYSIS: With an Obermatt Sentiment Rank of 71 (better than 71% compared with alternatives), overall professional sentiment and engagement for the stock Merck (USA) is above average. The Sentiment Rank is based on consolidating four sentiment indicators, with half of the indicators below and the other half above average for Merck (USA). Analyst Opinions are at a rank of 75 (better than 75% of alternative investments). Currently, stock research analysts tend to recommend a stock investment in the company. There are also many institutional investors invested in the stock, represented by a Professional Investors rank of 86 which means that currently, professional investors hold more stock in this company than in 86% of alternative investment opportunities. But Analyst Opinions Change has a rank of 43, which means that stock research experts are changing their opinions for the worse in recommending investing in the company. In other words, they are getting more critical of investments in Merck (USA). Furthermore, Market Pulse has a rank of 44, which means that the current professional news and professional social networks are on the negative side when discussing this company (more negative news than for 56% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 71 (more positive than 71% compared with investment alternatives), Merck (USA) has a reputation among professional investors that is above-average compared with that of its competitors. Three below-market sentiment indicators are a sign of caution, even if the stock has significantly appreciated. If analysts change their opinions, the stock may become too expensive. If the price is on the way down, the trend may continue. This may be a stock with a good reputation and history, but it may have reached its breaking point by now. Investors should look at the Value Ranks as well. If they indicate trouble, it may be around the corner. ...read more
Value Strategy: Merck (USA) Stock Price Value at the top
ANALYSIS: With an Obermatt Value Rank of 75 (better than 75% compared with alternatives) for 2024, Merck (USA) shares are significantly less expensive than comparable stocks. The Value Rank is based on consolidating four value indicators, with half of the indicators below and half above average for Merck (USA). Price-to-Profit (also referred to as price-earnings, P/E) is 67 which means that the stock price compared with what market professionals expect for future profits is lower than for 67% of comparable companies, indicating a good value concerning Merck (USA)'s profit levels. The same is valid for Price-to-Book Capital (also referred to as market-to-book ratio) with a Price-to-Book Rank of 26, which means that the stock price is lower as regards to invested capital than for 26% of comparable investments. On the other hand, Price-to-Sales is less favorable than 69% of alternatives (only 31% of peers have an even less favorable ratio). The same is valid for dividend yield, which is lower than 10% of comparable companies, making the stock more expensive as regards to the company's expected dividend payouts. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 75, is a buy recommendation based on Merck (USA)'s stock price compared with the company's operational size and dividend yields. This is a puzzling picture, because it means that profits are high while dividends are low. Since the stock price is low compared with invested capital but high in respect to expected revenues, it means that the company has more invested capital than peers for generating the same amount of revenue. Since profits are higher, it could be a "cash cow" situation (using the classic Boston Consulting BCG matrix naming convention) where the company is on a downward trend, still living from the profits of past products. As the company pays low dividends, it may harbor the opinion that a turnaround is possible, and it rather invests the cash than pay it out to shareholders, thus sealing the company's fate early. Any investment optimism should only be a buy trigger once thorough research is completed. ...read more
Growth Strategy: Merck (USA) Growth Momentum good
| GROWTH METRICS | October 10, 2024 | |||||||
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| REVENUE GROWTH | ||||||||
| REVENUE GROWTH | 46 |
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| PROFIT GROWTH | ||||||||
| PROFIT GROWTH | 100 |
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| CAPITAL GROWTH | ||||||||
| CAPITAL GROWTH | 38 |
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| STOCK RETURNS | ||||||||
| STOCK RETURNS | 55 |
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| CONSOLIDATED RANK: GROWTH | ||||||||
| CONSOLIDATED RANK: GROWTH | 69 |
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ANALYSIS: With an Obermatt Growth Rank of 69 (better than 69% compared with alternatives), Merck (USA) shows an above-average growth dynamic in its industry. Investors also speak of positive momentum. The Growth Rank is based on consolidating four value indicators, with half of the indicators below and half above average for Merck (USA). Profit Growth has a rank of 100, which means that currently professionals expect the company to grow its profits more than 100% of its competitors. This is a good sign for shareholders, which is confirmed by an above-average Stock Returns rank of 55 (above 55% of alternative investments). But Sales Growth has a below the median rank of 46, which means that, currently, professionals expect the company to grow less than 54% of its competitors, and Capital Growth also has a lower rank of 38. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 69, is a buy recommendation for growth and momentum investors. Because revenues and invested capital are the more solid growth indicators, the positive development on the profit side is less relevant. It may have been caused by cost-cutting, which may be a negative growth indicator. Finally, the above-average stock returns recently are a thing of the past and not a good indicator of future returns. Investors should be confident that the cost-cutting initiative leading to higher profits is to benefit the company's future. If not, there is little growth momentum, and investment is only advisable if the Value Ranks suggest a good investment timing for Merck (USA). ...read more
Safety Strategy: Merck (USA) Debt Financing Safety below-average
| SAFETY METRICS | October 10, 2024 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 34 |
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| REFINANCING | ||||||||
| REFINANCING | 23 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 92 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 48 |
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ANALYSIS: With an Obermatt Safety Rank of 48 (better than 48% compared with alternatives), the company Merck (USA) has financing practices on the riskier side, which means that their overall debt burden is above the industry average. This doesn't mean that the business of Merck (USA) is also risky, it only means that the company is on the riskier side in respect to bankruptcy in case things turn sour, assuming that public reporting is correct. The Safety Rank is based on consolidating three financing indicators, with just one indicator above average for Merck (USA). Liquidity is at 92, meaning the company generates more profit to service its debt than 92% of its competitors. This indicates that the company is safer when it comes to debt service. But Refinancing is riskier at a rank of 23, which means that the portion of the debt that is about to be refinanced is above average. It has more debt in the refinancing stage than 77% of its competitors. Leverage is also high at a rank of 34, which means that the company has an above-average debt-to-equity ratio. It has more debt than 66% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 48 (worse than 52% compared with alternatives), Merck (USA) has a financing structure that is riskier than that of its competitors. High Leverage (a low Obermatt Leverage Rank) is good in good times, because it usually indicates that shareholders get higher returns. The good Liquidity performance of the company is an indicator that this is the case. However, if you expect an economic downturn, you may stay clear of this stock because they have an above-average debt level that needs refinancing soon. ...read more
Combined financial peformance: Merck (USA) Top Financial Performance
| COMBINED PERFORMANCE | October 10, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 75 |
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| GROWTH | ||||||||
| GROWTH | 69 |
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| SAFETY | ||||||||
| SAFETY | 92 |
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| COMBINED | ||||||||
| COMBINED | 83 |
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ANALYSIS: With an Obermatt Combined Rank of 83 (better than 83% compared with investment alternatives), Merck (USA) (Pharmaceuticals, USA) shares have much better financial characteristics than comparable stocks. Shares of Merck (USA) are a good value (attractively priced) with a consolidated Value Rank of 75 (better than 75% of alternatives), show above-average growth (Growth Rank of 69) but are riskily financed (Safety Rank of 48), which means above-average debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 83, is a strong buy recommendation based on Merck (USA)'s financial characteristics. As the company Merck (USA)'s key financial metrics exhibit excellent performance in two areas, such as good value (Obermatt Value Rank of 75) and above-average growth (Obermatt Growth Rank of 69), it could be argued that the risk-taking in financing (Obermatt Safety Rank of only 48) indicates that the company is optimistic about the future and sees debt as an opportunity to boost returns. More debt means more shareholder returns if everything goes well. However, higher debt burdens are risky when interest rates rise or the business deteriorates in a crisis. If you believe the company's future is market-typical or even better, this could be an argument for a share purchase. ...read more
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