As Merck & Co., Inc. (NYSE:MRK) announced its earnings release on 31 March 2019, analysts seem fairly confident, as a 27% increase in profits is expected in the upcoming year, compared with the past 5-year average growth rate of -16%. By 2020, we can expect Merck’s bottom line to reach US$7.9b, a jump from the current trailing-twelve-month of US$6.2b. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Merck in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
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Can we expect Merck to keep growing?
The view from 14 analysts over the next three years is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To get an idea of the overall earnings growth trend for MRK, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
By 2022, MRK's earnings should reach US$10b, from current levels of US$6.2b, resulting in an annual growth rate of 11%. This leads to an EPS of $5.87 in the final year of projections relative to the current EPS of $2.33. Margins are currently sitting at 15%, which is expected to expand to 21% by 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For Merck, there are three pertinent factors you should look at:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is Merck worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Merck is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Merck? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.