Impressive Pharmaceutical Business Growth: Merck


Nearly trading at par with conservative calculated value

Merck is a $150 billion global healthcare company that recently traded at 53x its earnings and 4x its book value.

The New Jersey-based company recently reported its fourth quarter and full year 2017 results.

According to its press release, Merck reported 1% rise in revenue and a contrasting 34% drop in profits. The bottom line drop secondary to rise in tax costs, but income before tax showed a healthy 45% rise.

A couple of outstanding medicines that Merck sells achieved impressive growth: Keytruda (+172%; +$2.4 billion) and Zepatier (+199%, $1.1 billion).

“Our 2017 results reflect the underlying strength of our business and our ability to grow, despite significant headwinds.

“We enter 2018 with strong operating momentum, based on our key pillars of growth that will enable us to deliver on our mission of improving patients’ lives.”

Kenneth C. Frazier, chairman and chief executive officer, Merck

Merck also anticipates 2018 sales of $41.2 billion to $42.7 billion (vs. $40.1 billion in 2017), and GAAP earnings-per-share of $2.97 to $3.12 (vs. $0.93).

Balance sheet and cash flow statement not available at the time of writing.

As of September, Merck had $27 billion in debt (0.7x debt-equity) and $38 billion in book value.

In the past three fiscal years, Merck allocated $29 billion in financing activities and generated $25.4 billion in free cash flow.

Analysts have an average price target of $66.76 vs. $54.99 at the time of writing while conservative calculations provided a per share figure of $59.

Disclosure: No Merck shares.


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