Merck & Co., Inc. (MRK): investment thesis checklist
What a value investor writing down why they own Merck & Co., Inc. would be relying on, read from its filings: the figures that have carried the business, the lines a reader might set on them, and the published tests it meets today. A list to write against, not a view on the company.
1. The figures the case would rest on
- Return on invested capital: 21.9% in FY2025; between 0.9% and 25.6% over 10 filed years, median 14.9%. Does the thesis need it to stay inside that range?
- Return on equity: 34.7% in FY2025; between 1.0% and 38.0% over 10 filed years, median 29.7%. Does the thesis need it to stay inside that range?
- Free cash flow yield: 4.7% in FY2025; between 2.9% and 7.2% over 10 filed years, median 4.5%. Does the thesis need it to stay inside that range?
- EV to EBIT: 13.37x in FY2025; between 13.10x and 101.19x over 10 filed years, median 23.58x. Does the thesis need it to stay inside that range?
- Price to earnings: 14.46x in FY2025; between 14.46x and 778.71x over 10 filed years, median 25.41x. Does the thesis need it to stay inside that range?
- Gross margin: 74.8% in FY2025; between 64.8% and 76.3% over 10 filed years, median 70.0%. Does the thesis need it to stay inside that range?
- Revenue growth, 5-year CAGR: 9.4% in FY2025; between -3.7% and 10.4% over 10 filed years, median 2.6%. Does the thesis need it to stay inside that range?
- Share count change: -1.3% in FY2025; between -8.1% and 0.2% over 9 filed years, median -1.3%. Does the thesis need it to stay inside that range?
2. What must stay true: guardrails a reader might set
Each line is drafted from Merck & Co., Inc.'s own current figure, never from a level we think a business should clear, and replayed over its filed years. They are a reader's to keep, edit or drop.
Debt to Equity stays at or below 1.2x
Today 0.96x. Replayed over 10 filed years, it would have broken in 1; most recently FY2020, at 1.32x (10-K, filed 2021-02-25).
Return on Invested Capital stays at or above 17.6%
Today 21.95%. This indicator depends on inputs (market price, multi-statement composites) whose history is not deep enough to re-derive it with the same formula as the live value, so no honest retro-test exists for it.
Dividend Rate stays at or above $3.36
Today $3.40. This indicator depends on inputs (market price, multi-statement composites) whose history is not deep enough to re-derive it with the same formula as the live value, so no honest retro-test exists for it.
3. What would break it
- A filed year in which debt to equity rose above 1.2x.
- A filed year in which return on invested capital fell below 17.6%.
- A filed year in which dividend rate fell below $3.36.
4. The published tests it meets today
Of 30 tests value investors published: 3 met, 26 not met, 1 we could not complete. Counts, never a score.
Meets: ROIC at or above WACC; High return on tangibles; Cash-covered dividend.
What this cannot tell you
What the numbers say today, not the day one stops being true. The reasons are not written down.
An account adds
One email the night a number you wrote down breaks. Silence otherwise.
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How this is computedA computation on accounts filed with the SEC, not a recommendation and not advice. Past filings do not indicate future results. Risk disclaimer.