Are You Overpaying For Merck Stock Versus Its Rivals?
Merck (MRK) stock has returned 76.4% over the past twelve months, the most in a group of six drugmakers that includes Eli Lilly, Johnson & Johnson, and Pfizer. A run like that suggests buyers believe Merck’s business is pulling ahead of its rivals, or soon will. So how does Merck’s business rank against those same five rivals today?
Merck Ranks Last Of Six On Operating Margin
Merck’s operating margin over the last twelve months was 10.5%, the lowest of the six companies. That figure includes a $5.7 billion one-time charge for an acquisition. Merck’s revenue grew 4.6% over the same period, which placed it fourth.
Eli Lilly shows the contrast most clearly. It grew its revenue 49.6% over the same twelve months and kept an operating margin of 49.7%. Its stock nonetheless returned less than Merck stock did, at 51.7%.
So Merck stock has gained the most of the six over twelve months, while Merck’s business has the lowest margin and the fourth-best growth of the group. And you cannot compare the P/Es of Merck (112.3) or Pfizer (36.6) with the others, because each reported a loss in at least one of its last four quarters.
| MRK | PFE | JNJ | LLY | ABBV | BMY | |
|---|---|---|---|---|---|---|
| Market Cap ($ Bil) | 356.4 | 158.4 | 616.4 | 1,019.9 | 464.9 | 124.9 |
| PE Ratio (LTM) | 112.3 | 36.6 | 29.3 | 38.2 | 73.7 | 13.5 |
| LTM Revenue Growth | 4.6% | -0.2% | 8.1% | 49.6% | 10.4% | 3.1% |
| LTM Operating Margin | 10.5% | 26.7% | 26.8% | 49.7% | 33.9% | 28.1% |
| 12M Stock Return | 76.4% | 18.1% | 42.6% | 51.7% | 15.7% | 42.8% |
What Are Merck Stock Buyers Paying For?
Buyers appear to be paying for drugs that Merck has only begun to sell. Today one product family dominates: KEYTRUDA, Merck’s cancer therapy, brought in $8.4 billion of Merck’s $16.6 billion in revenue in the second quarter of 2026. Those sales grew 4%, and management said on its August 4, 2026 call that it expects U.S. KEYTRUDA growth to moderate.
On the same call, management pointed to more than $70 billion of commercial opportunity from over 20 new products. That is a forecast, and the newer drugs are small so far: WINREVAIR, a drug for pulmonary arterial hypertension, sold $588 million in the quarter, up 75%.
Building that lineup has also cost Merck profit. The $5.7 billion charge, recorded in that quarter, was for acquiring Terns Pharmaceuticals. A year ago, Merck’s operating margin over twelve months was 31%, against 10.5% now.
What Is Merck Itself Telling Investors To Expect?
Merck expects its revenue to grow 2% to 4% in 2026, to a range of $66.3 billion to $67.3 billion. Management raised that forecast on the August 4 call. It also lowered its full-year non-GAAP earnings forecast to $2.66 to $2.76 a share, a range from which the Terns charge has already taken $2.31 a share.
Management has said it expects only a shallow dip and a fast return to growth when KEYTRUDA loses its exclusivity. The risk is that the newer drugs arrive too slowly for growth to return that fast. There has already been one setback. A September 25, 2026 release said a U.S. application seeking accelerated approval for a cancer drug that Merck is developing with Daiichi Sankyo had been voluntarily withdrawn.
The price appears to assume that Merck’s newer drugs will grow large enough to stand beside KEYTRUDA, and that its margin will recover. WINREVAIR is growing quickly from a small base, but Merck’s margin has not yet recovered. Sales above the $67.3 billion top of management’s range for 2026 would be the first evidence that Merck is growing faster than management itself expects.
Does This Mean You Should Act On MRK?
Our purpose is to inform you with unique data so you make the right investment decisions. That said, betting on a single stock is always risky, no matter which direction you choose.
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