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
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

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!