January 18, 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 Industrial Average
Merck (USA) is listed as a top 10 stock on January 18, 2024 in the market index Dow Jones because of its high performance in at least one of the Obermatt investment strategies. While only half of the consolidated Obermatt Ranks exhibit above-average performance, the professional market sentiment is positive and it may be a solid investment proposition, especially if a growth recovery is to be expected soon. Based on the Obermatt 360° View of 76 (top 76% performer), Obermatt assesses an overall strong buy recommendation for Merck (USA) on January 18, 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 | January 18, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 50 |
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| GROWTH | ||||||||
| GROWTH | 43 |
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| SAFETY | ||||||||
| SAFETY | 46 |
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| SENTIMENT | ||||||||
| SENTIMENT | 94 |
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| 360° VIEW | ||||||||
| 360° VIEW | 76 |
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ANALYSIS: With an Obermatt 360° View of 76 (better than 76% 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 half the metrics below and half above average for Merck (USA). The consolidated Value Rank has an attractive rank of 50, 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 that the stock price is lower than for 50% of alternative stocks in the same industry. The consolidated Sentiment Rank has a good rank of 94, which means that professional investors are more optimistic about the stock than for 94% of alternative investment opportunities. But the consolidated Growth Rank has a low rank of 43, which means that the company exhibits below-average growth momentum when looking at financial metrics such as revenue, profit, invested capital growth, and stock returns. The consolidated Safety Rank has a riskier rank of 46, meaning the company has a riskier financing structure than 54 comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. ...read more
RECOMMENDATION: With a consolidated 360° View of 76, Merck (USA) is better positioned than 76% of all alternative stock investment opportunities based on the Obermatt Method. Half of the consolidated Obermatt Ranks exhibit above-average performance, but the other half are below market levels. The company enjoys a good value (Value Rank of 50) and positive market sentiment in the professional investor community (Sentiment Rank of 94), but growth expectations are below-average (Growth Rank of 43) and the financing structure is on the risky side(Safety Rank of 46). This combination is rather dangerous, because high debt levels (low safety) require growth to finance the debt burden. The current low growth level may be temporary, because professionals are actually optimistic (positive sentiment). Good value is sometimes an indication that the company's future is challenging. The below-par growth performance may be the reason for this assessment. Companies with less growth typically have a lower price than fast-growing competitors. Even though professional investor sentiment is strong, we recommend further evaluating whether the future of Merck (USA) is as challenging as the stock's low price suggests. Since the professional community is optimistic, the stock might just be going through a more challenging phase now, indicating that timing might be good now. ...read more
Sentiment Strategy: Professional Market Sentiment for Merck (USA) very positive
ANALYSIS: With an Obermatt Sentiment Rank of 94 (better than 94% compared with alternatives) for 2024, overall professional sentiment and engagement for the stock Merck (USA) is very positive. The Sentiment Rank is based on consolidating four sentiment indicators, with all four indicators above average for Merck (USA). Analyst Opinions are at a rank of 59 (better than 59% of alternative investments), which means that, currently, stock research analysts tend to recommend a stock investment in the company. Analyst Opinions Change is also positive with a rank of 52, which means that stock research experts are changing their opinions for the better and recommending investing in the company. They are getting more optimistic about stock investments in Merck (USA). The Professional Investors rank is 89, which means that currently, professional investors hold more stock in this company than in 89% of alternative investment opportunities. Pros tend to favor investing in this company. Finally, Market Pulse has a rank of 76 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 76% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 94 (more positive than 94% compared with investment alternatives), Merck (USA) has a reputation among professional investors that is significantly higher than that of its competitors. Since all market sentiment indicators are positive, the professional community highly recommends investment in the company. Does this mean Merck (USA) stocks are a safe investment? Far from it. Even professionals make mistakes. Especially in stock investing, there is a tendency to follow the leaders. Since trees don't grow to the heavens, such positive sentiment may also be interpreted as a danger sign. A lot of optimism can often be a sign of troubles to come, albeit unforeseen by most. ...read more
Value Strategy: Merck (USA) Stock Price Value better than average
ANALYSIS: With an Obermatt Value Rank of 50 (better than 50% 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 half of the indicators below and half above average for Merck (USA). Price-to-Profit (also referred to as price-earnings, P/E) is 59 which means that the stock price compared with what market professionals expect for future profits is lower than for 59% 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 10, which means that the stock price is lower as regards to invested capital than for 10% of comparable investments. On the other hand, Price-to-Sales is less favorable than 84% of alternatives (only 16% of peers have an even less favorable ratio). The same is valid for dividend yield, which is lower than 11% 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 50, 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 low
ANALYSIS: With an Obermatt Growth Rank of 43 (better than 43% compared with alternatives), Merck (USA) shows a below-average growth dynamic in its industry. There is limited momentum in this company. The Growth Rank is based on consolidating four value indicators, with all but one indicator above average for Merck (USA). Sales Growth has a rank of 56 which means that currently, professionals expect the company to grow more than 56% of its competitors. Capital Growth is also above 10% of competitors with a rank of 53, and Stock Returns with the rank of 67 is also an outperformance. Only Profit Growth is low with a rank of 10 which means that currently, professionals expect the company to grow its profits less than 90% of its competitors. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 43, is a hold recommendation for growth and momentum investors. All three operating growth indicators, namely revenue, profit, and capital growth, are showing improvements. This is a good indication of a company with a positive future. That might, at the same time, be the simple reason why profit growth is low. A growing company needs money and thus can't yet show high profit growth. Look out for signs in corporate communication about extra growth efforts costing time and money. If that is the case, Merck (USA) is a good growth stock. ...read more
Safety Strategy: Merck (USA) Debt Financing Safety below-average
| SAFETY METRICS | January 18, 2024 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 45 |
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| REFINANCING | ||||||||
| REFINANCING | 23 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 82 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 46 |
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ANALYSIS: With an Obermatt Safety Rank of 46 (better than 46% 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 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 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 46 (worse than 54% 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) Below-Average Financial Performance
| COMBINED PERFORMANCE | January 18, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 50 |
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| GROWTH | ||||||||
| GROWTH | 43 |
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| SAFETY | ||||||||
| SAFETY | 82 |
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| COMBINED | ||||||||
| COMBINED | 36 |
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ANALYSIS: With an Obermatt Combined Rank of 36 (worse than 64% compared with investment alternatives), Merck (USA) (Pharmaceuticals, USA) shares have somewhat below-average financial characteristics compared with similar stocks. Shares of Merck (USA) are a good value (attractively priced) with a consolidated Value Rank of 50 (better than 50% of alternatives) but show below-average growth (Growth Rank of 43), and are riskily financed (Safety Rank of 46), which means above-average debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 36, is a hold recommendation based on Merck (USA)'s financial characteristics. As the company Merck (USA)'s key financial metrics exhibit good value (Obermatt Value Rank of 50) but low growth (Obermatt Growth Rank of 43) and risky financing practices (Obermatt Safety Rank of 46), it may be a risky investment, because debt in times of crises can make things worse. The good value, better than 50% of comparable companies, may indicate the company's future is challenging. If you believe that low growth is temporary or just due to a specific current event, you may conclude that the good value of the stock provides an attractive investment opportunity. ...read more
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