MRK Testing Price Floor: Time to Load Up?
Merck (MRK) should be on your watchlist. Here is why – it is currently trading in the support zone ($76.28 – $84.31), levels from which it has bounced meaningfully before. In the last 10 years, the stock received buying interest at this level 6 times and subsequently went on to generate 18.7% in average peak returns.
| Peak Return | Days to Peak Return | |
|---|---|---|
| 10/28/2021 | 4.6% | 7 |
| 4/27/2022 | 12.1% | 27 |
| 6/13/2022 | 12.6% | 32 |
| 9/21/2022 | 64.8% | 642 |
| 2/12/2025 | 11.6% | 33 |
| 5/12/2025 | 6.4% | 74 |
But is the price action enough alone? It certainly helps if the fundamentals check out. For MRK Read Buy or Sell MRK Stock to see how convincing this buy opportunity might be.
Here are some quick data points:
- Revenue Growth: 4.1% LTM and 5.8% last 3 year average.
- Cash Generation: Nearly 26.7% free cash flow margin and 31.9% operating margin LTM.
- Recent Revenue Shocks: The minnimum annual revenue growth in last 3 years for MRK was 4.1%.
- Valuation: MRK trades at a PE multiple of 11.3
- Opportunity vs S&P: Compared to S&P, you get lower valuation, higher 3 year average revenue growth, and better margins
Merck provides pharmaceutical products for human health across multiple therapeutic areas and develops veterinary pharmaceuticals, vaccines, and health management solutions for animal health.
| MRK | S&P Median | |
|---|---|---|
| Sector | Health Care | – |
| Industry | Pharmaceuticals | – |
| PE Ratio | 11.3 | 23.5 |
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| LTM* Revenue Growth | 4.1% | 5.0% |
| 3Y Average Annual Revenue Growth | 5.8% | 5.8% |
| Min Annual Revenue Growth Last 3Y | 4.1% | -0.3% |
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| LTM* Operating Margin | 31.9% | 18.8% |
| 3Y Average Operating Margin | 22.8% | 17.7% |
| LTM* Free Cash Flow Margin | 26.7% | 13.2% |
*LTM: Last Twelve Months
That is one way to look at stocks. Trefis High Quality Portfolio evaluates much more, and is designed to reduce stock-specific risk while giving upside exposure
What Is Stock-Specific Risk If The Market Crashes?
That said, MRK isn’t immune to big drops. It fell about 38% during the Dot-Com Bubble and took a 63% hit in the Global Financial Crisis. Smaller shocks like 2018 and the inflation surge still knocked it down 18% to 20%. Even the Covid sell-off sliced nearly 27% off its peak. Solid fundamentals matter, but when fear hits, MRK’s no exception to significant pullbacks.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.