Merck & Co., Inc. (MRK): A Bull Case Theory

We came across a bullish thesis on Merck & Co., Inc. (MRK) on Value Investing Subreddit Page by CompanyCharts. In this article, we will summarize the bulls’ thesis on MRK. Merck & Co., Inc. (MRK)'s share was trading at $77.23 as of May 19^th. MRK’s trailing and forward P/E were 11.23 and 8.64 respectively according to Yahoo Finance.

Merck & Co. (MRK) currently trades at notably low valuation multiples, with a P/E of 11.24, P/S of 3.07, P/B of 4.01, and P/FCF of 11.51, reflecting multi-year lows across these key metrics. At a stock price of $77.23 (as of May 19, 2025), the company’s trailing twelve-month EPS stands at $6.87, sales per share at $25.17, book value at $19.24, and free cash flow per share at $6.71. With total assets around $115 billion and liabilities near $66.5 billion, Merck maintains shareholder equity of $48.4 billion against a market capitalization of $193 billion, setting a solid financial foundation.

Beyond raw valuations, Merck’s growth trajectory remains compelling, with a two-year EPS CAGR of 15.82% and a five-year CAGR of 11.71%, alongside steady sales per share growth and a striking 54.61% surge in free cash flow per share over the past year. These trends underpin attractive growth-adjusted metrics, including a two-year PEG of 0.71 and five-year PEG of 0.96, indicating that current prices may undervalue Merck’s operational progress. The market’s primary concern centers on the looming patent expiration of its blockbuster drug Keytruda by 2028 in Europe, though U.S. patents last longer. Yet, Merck’s proven ability to navigate past patent cliffs—such as with Singulair and Zocor—mitigates this risk.

The company’s strategic pipeline expansion through acquisitions in immunology, neurodegeneration, and oncology signals a robust effort to diversify and sustain future revenue streams. Overall, Merck presents a strong combination of value, growth, and strategic positioning, making its current market price an attractive entry point with substantial upside potential.

Merck & Co., Inc. (MRK) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 91 hedge fund portfolios held MRK at the end of the fourth quarter which was 86 in the previous quarter. While we acknowledge the risk and potential of MRK as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MRK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.