Should You Buy MRK Stock At $80?
INDIA - 2025/05/20: In this photo illustration, a MERCK logo is seen displayed on a smartphone and ... More in the background. (Photo Illustration by Avishek Das/SOPA Images/LightRocket via Getty Images)
Merck (NYSE:MRK) stock has experienced a significant 22% decline this year, sharply underperforming the broader S&P 500 index, which is down only 1%. This downturn can be attributed to several factors: a lowered guidance for 2025 and growing concerns about the long-term growth prospects of its blockbuster drugs, Keytruda and Gardasil.
Specifically, weak sales of Gardasil in China, a critical market for the vaccine, have unsettled investors. Furthermore, Keytruda is nearing the end of its market exclusivity period in 2028, raising questions about future revenue.
Despite these near-term concerns, we believe the negatives might already be priced into Merck's stock. While challenges exist, the company's current valuation appears very low.
We've reached this conclusion by analyzing Merck's current valuation against its recent operating performance and its historical and current financial health. Our assessment of Merck across key parameters—Growth, Profitability, Financial Stability, and Downturn Resilience—indicates that the company possesses strong operating performance and financial condition. However, for investors who seek lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative - having outperformed the S&P 500 and generated returns exceeding 91% since its inception.
Going by what you pay per dollar of sales or profit, MRK stock looks cheap compared to the broader market.
Merck's Revenues have grown marginally over recent years.
Merck's profit margins are much higher than most companies in the Trefis coverage universe.
Merck's balance sheet looks fine.
MRK stock has seen an impact that was slightly better than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on MRK stock? Our dashboard How Low Can Merck Stock Go In A Market Crash? has a detailed analysis of how the stock performed during and after previous market crashes.
In summary, Merck's performance across the parameters detailed above are as follows:
• Growth: Neutral
• Profitability: Very Strong
• Financial Stability: Neutral
• Downturn Resilience: Strong
• Overall: Strong
Considering Merck's very low valuation and its strong performance across key financial and operational parameters, we believe MRK stock is an attractive buy. However, it's crucial for investors to acknowledge the inherent risks. As seen during the 2008 financial crisis, MRK stock plummeted over 65% from its peak, demonstrating its susceptibility to significant downturns.
Current concerns also include the potential for continued declines in Gardasil sales and a slowdown in Keytruda's sales growth as it approaches patent expiry. Should these scenarios materialize, MRK stock could experience further declines. While we view Merck's current valuation as compelling, investors should thoroughly weigh these risks against the potential upside.
While MRK stock looks promising, investing in a single stock can be risky. On the other hand, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. 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.
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