Merck & Co., Inc. (MRK): A Global Health Care Giant Doling Out a Massive Dividend

Page 1 of 2

A SWOT analysis is a look at a company’s strengths, weaknesses, opportunities, and threats, and is a tremendous way to gain a detailed and thorough perspective on a company and its future. As 2013 begins, I would like to focus on a diversified global health care giant: Merck & Co, Inc. (NYSE:MRK).

The Business:

Warren Buffett once said, “Never invest in a business you can’t understand.” This not only allows the investor to purchase a company with conviction, however also allows them to spot trends blind to unfamiliar eyes. With this in mind, investors in any company should fully understand the business model of the company. Merck is global health care company which offers solutions through prescription medicines, vaccines, biologic therapies, animal health, and consumer care products. Based on market capitalization, Merck is valued at $125.92 billion. Because of the company’s pricing power, Merck possesses a profit margin of 11.94%.

Strengths:

  • Solid Revenue Growth: In 2000, Merck reported revenue of roughly $32 billion; in 2011, the company announced revenue of $48.04 billion, representing year over year annual growth of 3.76%, but future growth is expected to slow considerably with projections placing 2017 revenue at $49.30 billion.  This historic growth has been a result of the consistent offering of new and innovative products

  • Positive Free Cash Flow Position: In 2013, the company is projected to generate $13 billion of free cash flow, allowing the company to distribute to shareholders or reinvest in their own business
  • Institutional Vote of Confidence: 72.31% of shares outstanding are held by institutional investors, displaying the confidence some of largest investors in the world have in the company and its future
  • Relatively Low Volatility: Currently, the company carries a beta ratio of 0.32, representing a company trading with considerably less volatility than the overall market, a major upside for long-term investors
  • Dividend: Presently, Merck pays out quarterly dividends of $0.43, which annualized puts the dividend yield at 4.15%
  • Diversified Product Portfolio: Merck possesses a diverse product portfolio with products ranging from vaccines, prescription products, consumer products, and animal health; with major brands including Dr. Scholl’s, Claritin, and Coppertone; with the company’s pharmaceutical portfolio including Nasonex, Alimentary, Zocor, Remicade, NuvaRing, Singulair, and Temodar, and with this diversified product portfolio comes a greater level of security and predictability for investors
  • Net Cash Position: Merck’s $24 billion of cash and cash equivalents outweighs its $23 billion in debt, resulting in a $916 million cash position, a strength of the company
  • Necessity Products: The wide majority of products the company sells are considered necessities, and with this comes a stronger company in times of economic downfall

Weaknesses:

  • High Valuation: At the moment, Merck carries a price to earnings ratio of 19.13 and a price to sales ratio of 2.66, both of which indicate a company trading with a fairly high valuation
  • Margin Contraction: The company’s profit margin has contracted from 56.73% in 2008 to the current level of 11.94%, and this trend of margin contraction is a major weakness in the company

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!