July 20, 2023
Top 10 Stock Merck (USA) 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 July 20, 2023 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 60 (high 60% performer), Obermatt assesses an overall buy recommendation for Merck (USA) on July 20, 2023.
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) Buy
| 360 METRICS | July 20, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 55 |
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| GROWTH | ||||||||
| GROWTH | 63 |
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| SAFETY | ||||||||
| SAFETY | 49 |
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| SENTIMENT | ||||||||
| SENTIMENT | 60 |
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| 360° VIEW | ||||||||
| 360° VIEW | 60 |
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ANALYSIS: With an Obermatt 360° View of 60 (better than 60% compared with alternatives), overall professional sentiment and financial characteristics for the stock Merck (USA) are above average. 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 55, 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 55% of alternative stocks in the same industry. The consolidated Growth Rank has a good rank of 63, 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 60. But the company’s financing is risky with a Safety rank of 49. This means 51% of comparable companies have a safer financing structure than Merck (USA). ...read more
RECOMMENDATION: With a consolidated 360° View of 60, Merck (USA) is better positioned than 60% 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 55), above-average growth (Growth Rank of 63), and positive market sentiment in the professional investor community (Sentiment Rank of 60), 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 49), 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 60 (better than 60% 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 where all but one are above average for Merck (USA). Analyst Opinions are at a rank of 57 (better than 57% of alternative investments), which means that currently, stock research analysts tend to recommend a stock investment in the company. The Professional Investors rank is also good at 94, which means that currently, professional investors hold more stock in this company than in 94% of alternative investment opportunities. Pros tend to favor investing in this company. In addition, Market Pulse has a rank of 55 which means that the current professional news and professional social networks are on the positive side when discussing this company (more positive news than for 55% of competitors). But Analyst Opinions Change has a below-average rank of 17, which means that stock research experts are currently changing their opinions for the worse when it comes to recommending this stock. In other words, they are getting more critical of investments in Merck (USA). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 60 (more positive than 60% compared with investment alternatives), Merck (USA) has a reputation among professional investors that is above-average compared with that of its competitors. This is an early 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 might just materialize in the future. ...read more
Value Strategy: Merck (USA) Stock Price Value better than average
ANALYSIS: With an Obermatt Value Rank of 55 (better than 55% compared with alternatives), Merck (USA) shares are more attractively priced than the majority of comparable stocks. The Value Rank is based on consolidating four value indicators, with three out of four indicators below average for Merck (USA). Only the metric dividend yield has an above-average rank, reflecting that dividend practices are expected to be higher than 94% of comparable companies, making the stock an attractive buy for dividend investors. However, dividend investors may get disappointed because all other critical financial indicators are below the market median: Price-to-Sales is 25 which means that the stock price compared with what market professionals expect for future profits is higher than 75% of comparable companies, indicating a low value concerning Merck (USA)'s sales levels. The same is valid for Price-to-Profit (also referred to as price-earnings, P/E) with a rank of 46 which means that the stock price compared with what market professionals expect for future profit levels is higher than 54% of comparable companies. In addition, Price-to-Book (also referred to as market-to-book ratio) with a Price-to-Book Rank of 19 is also low. Compared with invested capital, the stock price is higher than for 81% of comparable investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 55, is a buy recommendation based on Merck (USA)'s stock price compared with the company's operational size and dividend yields. Should dividend investors pick Merck (USA)? The company-reported financials speak against it. The company is expensive compared with revenue and invested capital levels, two reliable company size indicators. In addition, it currently has a low level of profits. How can future dividends be paid in the case that profits remain low? Dividend investors should choose Merck (USA) only if they reasonably expect the low current profit levels to be transitory. ...read more
Growth Strategy: Merck (USA) Growth Momentum good
ANALYSIS: With an Obermatt Growth Rank of 63 (better than 63% 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). Capital Growth has a rank of 78, which means that currently professionals expect the company to grow its invested capital more than 18% of its competitors. Investors welcomed this, visible in the Stock Returns rank of 81 (above 81% of alternative investments). But Sales Growth has only a rank of 34, which means that, currently, professionals expect the company to grow less than 66% of its competitors, and Profit Growth is also low at a rank of 18. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 63, is a buy recommendation for growth and momentum investors. This is an ambiguous picture. Revenue growth and capital growth are strong, but the growth in profit, which seems good, can also be an indication that growth momentum may be negative. The fact that stock returns have been above average doesn't help much, as stock returns are less reliable in showing a company’s future growth potential. Prices may perform well for the simple reason that investors were too pessimistic in the past and are now correcting their opinions and moving the stock price to a more reasonable level. As the growth picture is mixed for Merck (USA), investors may want to look at value and sentiment indicators for a well-rounded picture of this stock. ...read more
Safety Strategy: Merck (USA) Debt Financing Safety below-average
| SAFETY METRICS | July 20, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 45 |
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| REFINANCING | ||||||||
| REFINANCING | 21 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 82 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 49 |
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ANALYSIS: With an Obermatt Safety Rank of 49 (better than 49% 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 82, meaning the company generates more profit to service its debt than 82% of its competitors. This indicates that the company is safer when it comes to debt service. But Refinancing is riskier at a rank of 21, 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 79% of its competitors. Leverage is also high at a rank of 45, which means that the company has an above-average debt-to-equity ratio. It has more debt than 55% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 49 (worse than 51% 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) Above-Average Financial Performance
| COMBINED PERFORMANCE | July 20, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 55 |
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| GROWTH | ||||||||
| GROWTH | 63 |
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| SAFETY | ||||||||
| SAFETY | 82 |
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| COMBINED | ||||||||
| COMBINED | 65 |
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ANALYSIS: With an Obermatt Combined Rank of 65 (better than 65% compared with investment alternatives), Merck (USA) (Pharmaceuticals, USA) shares have above-average financial characteristics compared with similar stocks. Shares of Merck (USA) are a good value (attractively priced) with a consolidated Value Rank of 55 (better than 55% of alternatives), show above-average growth (Growth Rank of 63) but are riskily financed (Safety Rank of 49), which means above-average debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 65, is a 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 55) and above-average growth (Obermatt Growth Rank of 63), it could be argued that the risk-taking in financing (Obermatt Safety Rank of only 49) 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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