Intrinsic value of Merck&Co - MRK

Previous Close

$69.06

  Intrinsic Value

$22.92

stock screener

  Rating & Target

str. sell

-67%

Previous close

$69.06

 
Intrinsic value

$22.92

 
Up/down potential

-67%

 
Rating

str. sell

We calculate the intrinsic value of MRK stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2017), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 188.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  40,924
  41,866
  42,942
  44,150
  45,488
  46,957
  48,556
  50,287
  52,152
  54,153
  56,295
  58,579
  61,012
  63,597
  66,341
  69,248
  72,325
  75,580
  79,018
  82,649
  86,480
  90,520
  94,779
  99,266
  103,992
  108,967
  114,204
  119,715
  125,513
  131,611
Variable operating expenses, $m
  35,335
  36,073
  36,916
  37,863
  38,913
  40,064
  41,318
  42,676
  44,138
  45,707
  44,139
  45,931
  47,838
  49,865
  52,016
  54,296
  56,709
  59,261
  61,957
  64,803
  67,807
  70,975
  74,314
  77,832
  81,538
  85,439
  89,545
  93,866
  98,412
  103,194
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  35,335
  36,073
  36,916
  37,863
  38,913
  40,064
  41,318
  42,676
  44,138
  45,707
  44,139
  45,931
  47,838
  49,865
  52,016
  54,296
  56,709
  59,261
  61,957
  64,803
  67,807
  70,975
  74,314
  77,832
  81,538
  85,439
  89,545
  93,866
  98,412
  103,194
Operating income, $m
  5,590
  5,793
  6,025
  6,286
  6,575
  6,892
  7,238
  7,611
  8,014
  8,446
  12,155
  12,648
  13,174
  13,732
  14,324
  14,952
  15,617
  16,319
  17,062
  17,846
  18,673
  19,545
  20,465
  21,434
  22,454
  23,528
  24,659
  25,849
  27,101
  28,418
EBITDA, $m
  13,547
  13,858
  14,215
  14,614
  15,057
  15,544
  16,073
  16,646
  17,263
  17,926
  18,635
  19,391
  20,196
  21,052
  21,960
  22,922
  23,941
  25,018
  26,157
  27,359
  28,627
  29,964
  31,374
  32,859
  34,423
  36,070
  37,804
  39,628
  41,547
  43,566
Interest expense (income), $m
  686
  1,318
  1,372
  1,440
  1,517
  1,604
  1,701
  1,806
  1,921
  2,046
  2,180
  2,324
  2,478
  2,643
  2,818
  3,004
  3,201
  3,410
  3,632
  3,866
  4,113
  4,375
  4,650
  4,941
  5,248
  5,570
  5,910
  6,269
  6,645
  7,042
  7,459
Earnings before tax, $m
  4,272
  4,421
  4,585
  4,769
  4,971
  5,192
  5,431
  5,690
  5,968
  6,266
  9,831
  10,170
  10,531
  10,914
  11,321
  11,751
  12,206
  12,687
  13,196
  13,732
  14,298
  14,895
  15,524
  16,186
  16,884
  17,618
  18,391
  19,204
  20,059
  20,958
Tax expense, $m
  1,153
  1,194
  1,238
  1,288
  1,342
  1,402
  1,466
  1,536
  1,611
  1,692
  2,654
  2,746
  2,843
  2,947
  3,057
  3,173
  3,296
  3,426
  3,563
  3,708
  3,861
  4,022
  4,191
  4,370
  4,559
  4,757
  4,965
  5,185
  5,416
  5,659
Net income, $m
  3,118
  3,227
  3,347
  3,481
  3,629
  3,790
  3,965
  4,154
  4,357
  4,574
  7,177
  7,424
  7,688
  7,967
  8,264
  8,578
  8,911
  9,262
  9,633
  10,025
  10,438
  10,873
  11,332
  11,816
  12,325
  12,861
  13,425
  14,019
  14,643
  15,300

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  89,550
  91,610
  93,964
  96,607
  99,536
  102,750
  106,249
  110,037
  114,118
  118,497
  123,183
  128,182
  133,505
  139,163
  145,166
  151,527
  158,261
  165,382
  172,907
  180,852
  189,234
  198,075
  207,394
  217,212
  227,553
  238,440
  249,900
  261,959
  274,646
  287,990
Adjusted assets (=assets-cash), $m
  89,550
  91,610
  93,964
  96,607
  99,536
  102,750
  106,249
  110,037
  114,118
  118,497
  123,183
  128,182
  133,505
  139,163
  145,166
  151,527
  158,261
  165,382
  172,907
  180,852
  189,234
  198,075
  207,394
  217,212
  227,553
  238,440
  249,900
  261,959
  274,646
  287,990
Revenue / Adjusted assets
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
Average production assets, $m
  47,104
  48,187
  49,426
  50,816
  52,357
  54,047
  55,888
  57,880
  60,027
  62,330
  64,795
  67,425
  70,225
  73,200
  76,358
  79,704
  83,246
  86,992
  90,950
  95,129
  99,539
  104,189
  109,090
  114,255
  119,694
  125,421
  131,449
  137,792
  144,466
  151,485
Working capital, $m
  2,046
  2,093
  2,147
  2,207
  2,274
  2,348
  2,428
  2,514
  2,608
  2,708
  2,815
  2,929
  3,051
  3,180
  3,317
  3,462
  3,616
  3,779
  3,951
  4,132
  4,324
  4,526
  4,739
  4,963
  5,200
  5,448
  5,710
  5,986
  6,276
  6,581
Total debt, $m
  25,410
  26,664
  28,098
  29,708
  31,492
  33,449
  35,580
  37,887
  40,372
  43,039
  45,892
  48,937
  52,179
  55,624
  59,280
  63,154
  67,255
  71,592
  76,174
  81,013
  86,118
  91,502
  97,177
  103,156
  109,454
  116,084
  123,063
  130,407
  138,133
  146,260
Total liabilities, $m
  54,536
  55,790
  57,224
  58,834
  60,618
  62,575
  64,706
  67,013
  69,498
  72,165
  75,018
  78,063
  81,305
  84,750
  88,406
  92,280
  96,381
  100,718
  105,300
  110,139
  115,244
  120,628
  126,303
  132,282
  138,580
  145,210
  152,189
  159,533
  167,259
  175,386
Total equity, $m
  35,014
  35,819
  36,740
  37,774
  38,919
  40,175
  41,543
  43,024
  44,620
  46,333
  48,164
  50,119
  52,201
  54,413
  56,760
  59,247
  61,880
  64,665
  67,607
  70,713
  73,991
  77,447
  81,091
  84,930
  88,973
  93,230
  97,711
  102,426
  107,386
  112,604
Total liabilities and equity, $m
  89,550
  91,609
  93,964
  96,608
  99,537
  102,750
  106,249
  110,037
  114,118
  118,498
  123,182
  128,182
  133,506
  139,163
  145,166
  151,527
  158,261
  165,383
  172,907
  180,852
  189,235
  198,075
  207,394
  217,212
  227,553
  238,440
  249,900
  261,959
  274,645
  287,990
Debt-to-equity ratio
  0.730
  0.740
  0.760
  0.790
  0.810
  0.830
  0.860
  0.880
  0.900
  0.930
  0.950
  0.980
  1.000
  1.020
  1.040
  1.070
  1.090
  1.110
  1.130
  1.150
  1.160
  1.180
  1.200
  1.210
  1.230
  1.250
  1.260
  1.270
  1.290
  1.300
Adjusted equity ratio
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,118
  3,227
  3,347
  3,481
  3,629
  3,790
  3,965
  4,154
  4,357
  4,574
  7,177
  7,424
  7,688
  7,967
  8,264
  8,578
  8,911
  9,262
  9,633
  10,025
  10,438
  10,873
  11,332
  11,816
  12,325
  12,861
  13,425
  14,019
  14,643
  15,300
Depreciation, amort., depletion, $m
  7,957
  8,065
  8,189
  8,328
  8,482
  8,651
  8,835
  9,035
  9,249
  9,480
  6,480
  6,742
  7,022
  7,320
  7,636
  7,970
  8,325
  8,699
  9,095
  9,513
  9,954
  10,419
  10,909
  11,425
  11,969
  12,542
  13,145
  13,779
  14,447
  15,148
Funds from operations, $m
  11,075
  11,293
  11,537
  11,810
  12,111
  12,441
  12,800
  13,188
  13,606
  14,054
  13,656
  14,167
  14,710
  15,287
  15,900
  16,549
  17,235
  17,961
  18,728
  19,537
  20,392
  21,292
  22,241
  23,241
  24,294
  25,403
  26,570
  27,798
  29,090
  30,448
Change in working capital, $m
  40
  47
  54
  60
  67
  73
  80
  87
  93
  100
  107
  114
  122
  129
  137
  145
  154
  163
  172
  182
  192
  202
  213
  224
  236
  249
  262
  276
  290
  305
Cash from operations, $m
  11,035
  11,246
  11,483
  11,749
  12,044
  12,368
  12,720
  13,102
  13,513
  13,954
  13,549
  14,053
  14,589
  15,158
  15,763
  16,403
  17,081
  17,798
  18,556
  19,356
  20,200
  21,090
  22,028
  23,017
  24,058
  25,154
  26,308
  27,522
  28,800
  30,143
Maintenance CAPEX, $m
  -4,620
  -4,710
  -4,819
  -4,943
  -5,082
  -5,236
  -5,405
  -5,589
  -5,788
  -6,003
  -6,233
  -6,480
  -6,742
  -7,022
  -7,320
  -7,636
  -7,970
  -8,325
  -8,699
  -9,095
  -9,513
  -9,954
  -10,419
  -10,909
  -11,425
  -11,969
  -12,542
  -13,145
  -13,779
  -14,447
New CAPEX, $m
  -905
  -1,083
  -1,238
  -1,390
  -1,541
  -1,690
  -1,841
  -1,992
  -2,147
  -2,304
  -2,465
  -2,630
  -2,800
  -2,976
  -3,158
  -3,346
  -3,542
  -3,746
  -3,958
  -4,179
  -4,409
  -4,650
  -4,902
  -5,164
  -5,439
  -5,727
  -6,028
  -6,343
  -6,673
  -7,019
Cash from investing activities, $m
  -5,525
  -5,793
  -6,057
  -6,333
  -6,623
  -6,926
  -7,246
  -7,581
  -7,935
  -8,307
  -8,698
  -9,110
  -9,542
  -9,998
  -10,478
  -10,982
  -11,512
  -12,071
  -12,657
  -13,274
  -13,922
  -14,604
  -15,321
  -16,073
  -16,864
  -17,696
  -18,570
  -19,488
  -20,452
  -21,466
Free cash flow, $m
  5,511
  5,452
  5,426
  5,416
  5,422
  5,442
  5,475
  5,521
  5,578
  5,648
  4,852
  4,943
  5,046
  5,160
  5,285
  5,421
  5,569
  5,728
  5,899
  6,082
  6,278
  6,486
  6,708
  6,943
  7,193
  7,458
  7,738
  8,034
  8,347
  8,678
Issuance/(repayment) of debt, $m
  1,000
  1,254
  1,434
  1,610
  1,784
  1,957
  2,131
  2,307
  2,485
  2,667
  2,853
  3,045
  3,242
  3,445
  3,656
  3,874
  4,101
  4,337
  4,582
  4,838
  5,105
  5,384
  5,675
  5,979
  6,298
  6,631
  6,979
  7,344
  7,726
  8,127
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  1,000
  1,254
  1,434
  1,610
  1,784
  1,957
  2,131
  2,307
  2,485
  2,667
  2,853
  3,045
  3,242
  3,445
  3,656
  3,874
  4,101
  4,337
  4,582
  4,838
  5,105
  5,384
  5,675
  5,979
  6,298
  6,631
  6,979
  7,344
  7,726
  8,127
Total cash flow (excl. dividends), $m
  6,511
  6,706
  6,859
  7,026
  7,206
  7,399
  7,606
  7,827
  8,063
  8,315
  7,705
  7,988
  8,288
  8,605
  8,941
  9,295
  9,670
  10,065
  10,481
  10,920
  11,383
  11,870
  12,383
  12,923
  13,491
  14,088
  14,717
  15,378
  16,073
  16,804
Retained Cash Flow (-), $m
  -678
  -805
  -921
  -1,033
  -1,145
  -1,257
  -1,368
  -1,481
  -1,596
  -1,712
  -1,832
  -1,955
  -2,081
  -2,212
  -2,347
  -2,487
  -2,633
  -2,784
  -2,942
  -3,106
  -3,278
  -3,457
  -3,644
  -3,839
  -4,043
  -4,257
  -4,481
  -4,715
  -4,960
  -5,218
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  321
  327
  335
  344
  353
  364
  376
  388
  402
  417
  433
  450
  469
  488
  509
  531
  554
  579
  605
  632
  661
  692
  724
  758
  794
  832
  872
  914
  958
  1,004
Cash available for distribution, $m
  5,833
  5,901
  5,939
  5,992
  6,060
  6,142
  6,238
  6,346
  6,468
  6,602
  5,873
  6,033
  6,207
  6,393
  6,594
  6,808
  7,037
  7,280
  7,539
  7,814
  8,105
  8,413
  8,739
  9,084
  9,448
  9,831
  10,236
  10,663
  11,113
  11,587
Discount rate, %
  4.90
  5.15
  5.40
  5.67
  5.96
  6.25
  6.57
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.19
  10.70
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
PV of cash for distribution, $m
  5,560
  5,337
  5,072
  4,806
  4,538
  4,268
  3,997
  3,723
  3,448
  3,173
  2,524
  2,297
  2,073
  1,855
  1,644
  1,442
  1,251
  1,072
  907
  757
  622
  504
  401
  314
  241
  182
  134
  97
  68
  47
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Merck & Co., Inc. is a global healthcare company. The Company offers health solutions through its prescription medicines, vaccines, biologic therapies and animal health products. It operates through four segments: Pharmaceutical, Animal Health, Healthcare Services and Alliances. The Company's Pharmaceutical segment includes human health pharmaceutical and vaccine products marketed either directly by the Company or through joint ventures. Human health pharmaceutical products consist of therapeutic and preventive agents, generally sold by prescription, for the treatment of human disorders. The Company sells its human health pharmaceutical products primarily to drug wholesalers and retailers, hospitals, government agencies and managed healthcare providers, such as health maintenance organizations, pharmacy benefit managers and other institutions. Vaccine products consist of preventive pediatric, adolescent and adult vaccines, primarily administered at physician offices.

FINANCIAL RATIOS  of  Merck&Co (MRK)

Valuation Ratios
P/E Ratio 48.4
Price to Sales 4.8
Price to Book 4.7
Price to Tangible Book
Price to Cash Flow 18.3
Price to Free Cash Flow 21.7
Growth Rates
Sales Growth Rate 0.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 25.8%
Cap. Spend. - 3 Yr. Gr. Rate 0.8%
Financial Strength
Quick Ratio 25
Current Ratio 0.3
LT Debt to Equity 60.6%
Total Debt to Equity 62%
Interest Coverage 8
Management Effectiveness
Return On Assets 4.6%
Ret/ On Assets - 3 Yr. Avg. 7.3%
Return On Total Capital 5.8%
Ret/ On T. Cap. - 3 Yr. Avg. 9.5%
Return On Equity 9.2%
Return On Equity - 3 Yr. Avg. 14.3%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 66.4%
Gross Margin - 3 Yr. Avg. 64.6%
EBITDA Margin 27.1%
EBITDA Margin - 3 Yr. Avg. 39.1%
Operating Margin 12.2%
Oper. Margin - 3 Yr. Avg. 22%
Pre-Tax Margin 11.7%
Pre-Tax Margin - 3 Yr. Avg. 22.1%
Net Profit Margin 9.8%
Net Profit Margin - 3 Yr. Avg. 16.4%
Effective Tax Rate 15.4%
Eff/ Tax Rate - 3 Yr. Avg. 21.3%
Payout Ratio 130.7%

MRK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MRK stock intrinsic value calculation we used $40122 million for the last fiscal year's total revenue generated by Merck&Co. The default revenue input number comes from 2017 income statement of Merck&Co. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our MRK stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.9%, whose default value for MRK is calculated based on our internal credit rating of Merck&Co, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Merck&Co.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of MRK stock the variable cost ratio is equal to 86.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for MRK stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Merck&Co.

Corporate tax rate of 27% is the nominal tax rate for Merck&Co. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the MRK stock is equal to 0.8%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for MRK are equal to 115.1%.

Life of production assets of 10 years is the average useful life of capital assets used in Merck&Co operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for MRK is equal to 5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $34336 million for Merck&Co - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 2724 million for Merck&Co is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Merck&Co at the current share price and the inputted number of shares is $188.1 billion.

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COMPANY NEWS

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▶ The Brief, August 9   [Aug-09-18 04:33PM  Barrons.com]
▶ [$$] Merck KGaA Renews Commitment to U.S. Presence   [01:16PM  The Wall Street Journal]
▶ [$$] European Corporate Roundup for Thursday   [04:46AM  The Wall Street Journal]
▶ [$$] Merck KGaA Sales Edged Up, Confirms Outlook   [02:16AM  The Wall Street Journal]
▶ Patients who accepted infected kidneys cured of hepatitis C   [Aug-06-18 05:27PM  Associated Press]
▶ Why The 'Heat Wave' For U.S. Pharma Could Continue This Month   [Aug-01-18 04:12PM  Investor's Business Daily]
▶ Pfizer Breaks Out As CEO Mulls Future Of Drug Price Rebates   [Jul-31-18 04:20PM  Investor's Business Daily]
▶ How AbbVie Makes its Money   [10:30AM  Investopedia]
▶ Top 5 Things to Know in the Market on Friday   [08:54AM  Investing.com]
▶ [$$] Merck Cancer Drug Drives Second-Quarter Sales   [08:07AM  The Wall Street Journal]
▶ Merck & Co., Inc. to Host Earnings Call   [06:00AM  ACCESSWIRE]
▶ Merck Q2 Earnings Preview   [02:57PM  Benzinga]
▶ [$$] Congo Declares End to Ninth Ebola Outbreak   [Jul-24-18 08:06PM  The Wall Street Journal]
▶ Merck Announces Fourth-Quarter 2018 Dividend   [12:15PM  Business Wire]
▶ [$$] Chinas Latest Consumer Scandal: Unsafe Vaccines   [Jul-23-18 09:52PM  The Wall Street Journal]
▶ [$$] China's Latest Consumer Scandal: Unsafe Vaccines   [04:38AM  The Wall Street Journal]
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