Is Merck Still Attractive After Oncology Wins and Strong 5 Year Share Performance in 2025
- If you are wondering whether Merck at around $100 a share is still a smart buy, or if most of the upside has already been priced in, you are in the right place.
- Merck’s share price has nudged up about 0.6% over the last week and 9.7% in the past month, but that still only translates to roughly 1.1% year to date and 2.0% over the last year, after a stronger 53.7% run over five years.
- Recent headlines have centered on Merck’s expanding oncology and vaccine franchises, with regulators continuing to approve new indications for its key cancer drugs while the company invests heavily in next generation treatments. At the same time, investors are weighing patent cliff concerns and a busy dealmaking pipeline. Together, these factors help explain the mix of cautious long term performance and short term share price strength.
- Despite that backdrop, Merck currently scores a solid 5/6 on our valuation checks, suggesting the stock screens as undervalued on most of the metrics we track. Next, we will walk through those valuation approaches before finishing with an even better way to judge what Merck might really be worth.
Find out why Merck's 2.0% return over the last year is lagging behind its peers.
Approach 1: Merck Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model estimates what a company is worth by projecting its future cash flows and then discounting those projections back to today in dollar terms.
For Merck, the latest twelve month Free Cash Flow is about $13.1 billion. Using a 2 Stage Free Cash Flow to Equity model, analyst forecasts and extrapolations from Simply Wall St point to Free Cash Flow rising to roughly $25.5 billion by 2035. Early years are driven by analyst estimates, with later years tapering to more modest growth as the business matures.
When all those projected cash flows are discounted to today, the model arrives at an intrinsic value of about $215.04 per share. Compared with the current share price around $100, the DCF suggests Merck is trading at roughly a 53.4% discount.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Merck is undervalued by 53.4%. Track this in your watchlist or portfolio, or discover 907 more undervalued stocks based on cash flows.
Approach 2: Merck Price vs Earnings
For profitable companies like Merck, the Price to Earnings ratio is a straightforward way to gauge how much investors are willing to pay today for each dollar of current earnings. It naturally reflects the market’s view on future growth and the risks around those earnings.
In general, faster growth and lower perceived risk justify a higher PE multiple, while slower growth or higher uncertainty point to a lower, more conservative ratio. Merck currently trades on a PE of about 13.1x, well below both the Pharmaceuticals industry average of roughly 20.0x and a peer average near 18.2x. This suggests the market is pricing Merck more cautiously than many competitors.
Simply Wall St’s Fair Ratio framework goes a step further by estimating what PE multiple might be appropriate for Merck given its earnings growth profile, profitability, size, industry positioning and risk factors. For Merck, this Fair Ratio comes out at around 30.4x, significantly above the current 13.1x. Because this approach is tailored to the company rather than relying only on blunt peer or industry comparisons, it can offer a more nuanced view of value. In this case, it points to Merck screening as attractively priced on earnings.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Merck Narrative
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which are simple stories that link your view of Merck’s pipeline, risks and competitive position to specific assumptions about its future revenue, earnings, margins and ultimately a fair value estimate. Instead of only relying on static metrics like PE or a single analyst target, a Narrative on Simply Wall St’s Community page turns your perspective into a dynamic forecast, then compares the resulting fair value to today’s share price to help you explore whether Merck might suit a buy, hold or sell view. Narratives are easy to create and follow, and they automatically refresh as new information, such as earnings or major news on deals like the Cidara acquisition or developments around Keytruda’s patent overhang, flows into the platform. For example, one Merck Narrative might lean more optimistic, assuming the late stage pipeline delivers enough new blockbusters to justify a fair value closer to the higher analyst target of about $141. A more cautious Narrative might focus on patent and pricing risks and land nearer the lower end around $82, providing a clear, numbers backed way to express and track an individual view.
Do you think there's more to the story for Merck? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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