As of June 10, 2025, Merck & Co Inc's estimated intrinsic value ranges from $97.61 to $144.91 per share, depending on the valuation methodology applied.
| Valuation Method | Fair Value (USD) | Implied Upside/Downside |
|---|---|---|
| Discounted Cash Flow (10Y) | $144.91 | +82.7% |
| Discounted Cash Flow (5Y) | $120.02 | +51.3% |
| Dividend Discount Model (Multi-Stage) | $98.93 | +24.7% |
| Dividend Discount Model (Stable) | $97.61 | +23.0% |
| Earnings Power Value | $100.70 | +26.9% |
Is Merck & Co Inc (MRK) undervalued or overvalued?
With the current market price at $79.33, the stock appears to be significantly undervalued.
Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Merck & Co Inc's intrinsic value, including:
The cost of capital is a critical factor in valuation models, representing the required return for investors.
| WACC Component | Low | High |
|---|---|---|
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.52 | 0.58 |
| Cost of equity | 6.3% | 8.1% |
| Cost of debt | 4.0% | 4.5% |
| Tax rate | 13.1% | 17.6% |
| Debt/Equity ratio | 0.19 | 0.19 |
| After-tax WACC | 5.8% | 7.4% |
Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:
| DCF Model | Fair Value | Enterprise Value | % from Terminal Value |
|---|---|---|---|
| 5-Year Growth | $120 | $327,594M | 77.1% |
| 10-Year Growth | $145 | $390,094M | 61.7% |
| 5-Year EBITDA | $81 | $228,448M | 67.2% |
| 10-Year EBITDA | $107 | $295,505M | 49.5% |
The DDM values a company based on its expected future dividend payments. We used two approaches:
EPV assesses a company's value based on its current normalized earnings power, assuming no growth.
| EPV Component | Value |
|---|---|
| Normalized Earnings | $18,201M |
| Discount Rate (WACC) | 7.4% - 5.8% |
| Enterprise Value | $245,257M - $312,895M |
| Net Debt | $26,215M |
| Equity Value | $219,042M - $286,680M |
| Outstanding Shares | 2,511M |
| Fair Value | $87 - $114 |
| Selected Fair Value | $100.70 |
| Metric | Value |
|---|---|
| Market Capitalization | $199200M |
| Enterprise Value | $225415M |
| Trailing P/E | 11.43 |
| Forward P/E | 11.81 |
| Trailing EV/EBITDA | 7.30 |
| Current Dividend Yield | 400.41% |
| Dividend Growth Rate (5Y) | 5.98% |
| Debt-to-Equity Ratio | 0.19 |
To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:
| Valuation Method | Weight | Weighted Value |
|---|---|---|
| Discounted Cash Flow (10Y) | 30% | $43.47 |
| Discounted Cash Flow (5Y) | 25% | $30.01 |
| Dividend Discount Model (Multi-Stage) | 20% | $19.79 |
| Dividend Discount Model (Stable) | 15% | $14.64 |
| Earnings Power Value | 10% | $10.07 |
| Weighted Average | 100% | $117.98 |
Based on our comprehensive valuation analysis, Merck & Co Inc's weighted average intrinsic value is $117.98, which is approximately 48.7% above the current market price of $79.33.
Key investment considerations:
Given these factors, we believe Merck & Co Inc is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.