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

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

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!