Merck’s Valuations after Its 4Q17 Earnings
Merck & Co.’s valuations
Merck & Co. reported earnings per share (or EPS) of $0.98 on revenues of $10.4 billion in 4Q17. This EPS metric represents 3.0% growth in revenues compared to EPS of $0.89 on revenues of $10.1 billion in 4Q16. The chart below shows revenues and EPS for Merck & Co. since 1Q16.
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For 4Q17, Merck & Co. missed analysts’ estimates for revenues, but it surpassed analysts’ estimates for EPS. The company reported EPS of $0.98 compared to the estimated EPS of $0.94.
PE multiples represent what one share can buy for an equity investor. On February 12, 2018, Merck & Co. was trading at a forward PE multiple of ~13.1x, while the industry traded at a forward PE multiple average of 14.6x.
On a capital structure–neutral basis, Merck & Co. traded at a forward EV-to-EBITDA1 multiple of ~10.8x on February 12, 2018. This metric is much lower than the industry average of ~12.2x.
- earnings before interest, tax, depreciation, and amortization ↩