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Avoid Merck Stock Until Shares Pull Back

MRK) is truly a great pharmaceutical company, but MRK stock has already moved up over 24% from its recent lows this year. Moreover, the stock is very close to its average dividend yield and target price — based on its average price-earnings ratio. That’s why investors should stay clear until shares pull back.” data-reactid=”12″>Merck (NYSE:MRK) is truly a great pharmaceutical company, but MRK stock has already moved up over 24% from its recent lows this year. Moreover, the stock is very close to its average dividend yield and target price — based on its average price-earnings ratio. That’s why investors should stay clear until shares pull back.

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Don’t get me wrong. I still think Merck is a very worthwhile company. It has a large $191 billion market value, a reasonable dividend yield and a good P/E ratio.

according to Seeking Alpha. These are relatively cheap investment ratios for such a large drug company.

InvestorPlace – Stock Market News, Stock Advice & Trading Tips” data-reactid=”23″>InvestorPlace – Stock Market News, Stock Advice & Trading Tips

Investors should definitely consider buying this stock at some point in their investing career. But just not right now. The valuation for MRK stock seems pretty full to me.

What’s Behind Merck’s Recent Rise?

novel coronavirus vaccine efforts with these five companies.” data-reactid=”26″>President Donald Trump’s administration recently selected five companies, including Merck, under its Operation Warp Speed initiative. The goal is to get a vaccine up and running by the end of January 2021. The government plans to help fund novel coronavirus vaccine efforts with these five companies.

Although Merck has not yet announced any clinical trials, its efforts should be enhanced with this program. It is using the same platform that was used to make its successful Ebola vaccine.

a second vaccine effort using a measles vaccine platform, along with a Vienna-based company called Themis Biosciences. In fact, Merck recently acquired Themis Biosciences.

annual meeting on May 26 that having “2 more focused companies will allow us to reach more patients, drive stronger growth, and unlock long-term value for shareholders.”

Analysts expect earnings this year of up to $5.32 per share, up from normalized EPS of $3.53 in 2019. Moreover, the earnings forecast for 2021 is for EPS of $6.03.

Target Values for MRK Stock

past four years has been 2.98%. But today’s dividend is 2.97%. So MRK stock is exactly at its historical yield today. There is little upside based on this valuation measure.

Moreover, over the past nine years, Merck’s average annual P/E ratio has been 14.8 times earnings. Using this measure, we can project a slightly higher target price for MRK stock.

For example, using the $6.03 2021 EPS estimate and multiplying this by 14.8 produces a target price of $89.24 per share. Before the most recent selloff, MRK stock was trading near $81. Using that price, the target is just 10% higher.

That is not much to talk about. It shows that the stock represents full value. So unless the spinoff of Organon brings in a surprise earnings forecast, the upside opportunity is limited. There is little margin of safety here for most investors.

What Should You Do With Merck?

drugs administered in doctor’s offices.

In other words, the ability of doctors to use its products is high. In addition, its cancer drug Keytruda has over 20 studies for its use in different cancers.

So watch MRK stock and look for an opportunity to buy it on any kind of new pullback. You will likely be rewarded over the long term.

Total Yield Value Guide which you can review here.

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