Merck Shares: Are They Really Undervalued?

Merck shares have been drawing attention with recent pullbacks. Over the past week, the shares fell by 6.3%, and in the last month, they decreased by 7.5%, resulting in a year-to-date decline of 16.8%.

Recent news highlighted developments in the pharmaceutical sector and changes in the oncology field where competition is intensifying. This situation has created new dynamics that affect investors' thoughts about Merck's future. Issues such as the expiration of patent durations and expanded research partnerships continue to enhance Merck's visibility.

Looking at Merck's valuation, traditional valuation methods show that it scores 6 out of 6. The intrinsic value per share of Merck is calculated at $203.87, with the stock currently trading at approximately a 59.5% discount to its intrinsic value.

Over the past year, with a -16.0% return, Merck has lagged behind its competitors in the industry. The Discounted Cash Flow (DCF) model estimates the firm’s intrinsic value by predicting its future cash flows. Merck recorded a free cash flow of $14.6 billion in the last 12 months, and analysts expect this amount to reach $25.0 billion by 2029.

Another commonly used method for measuring the value of stocks is the Price/Earnings (PE) ratio. Merck's current PE ratio is 10.8 times, which is below the sector average of 17.9 times. At first glance, this suggests that Merck is a low-priced stock. However, the Fair Ratio calculated for Merck is 27.1x, which offers a deeper analysis in line with Merck's future growth rates and risk profile.

Additionally, among investors, hopes for Merck's new product launches lead some to expect a share price of $141.00, while more cautious others believe that a level of $82.00 would be sufficient.

These analyses on Merck's valuation are being updated with accurate information to support investors' buy or sell decisions.