Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
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- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Assets
- Analysis of Geographic Areas
- Enterprise Value (EV)
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Return on Assets (ROA) since 2005
- Analysis of Revenues
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Profitability Ratios (Summary)
Merck & Co. Inc., profitability ratios
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
The profitability metrics demonstrate a period of fluctuation followed by improvement. Initial values indicate strong profitability, which experienced a significant dip in 2023 before recovering and continuing to rise through 2025. This pattern is evident across all reported ratios.
- Gross Profit Margin
- The gross profit margin exhibited relative stability between 2021 and 2025, ranging from 70.63% to 76.32%. A slight decrease was observed from 2021 to 2022, followed by an increase in 2023, peaking in 2024, and then a modest decline in 2025. Overall, the gross profit margin remained consistently high throughout the period.
- Operating Profit Margin
- The operating profit margin showed the most dramatic fluctuation. It increased from 25.74% in 2021 to 30.27% in 2022, then experienced a substantial decrease to 3.92% in 2023. A strong recovery followed, with the margin rising to 31.03% in 2024 and further to 32.64% in 2025. This suggests a significant operational challenge in 2023 that was subsequently addressed.
- Net Profit Margin
- Similar to the operating profit margin, the net profit margin declined sharply in 2023, falling to 0.61% from 26.79% in 2021 and 24.49% in 2022. The margin then rebounded strongly, reaching 26.68% in 2024 and 28.08% in 2025, indicating improved overall profitability. The trend mirrors that of the operating profit margin, suggesting that changes in operating income significantly impacted net income.
- Return on Equity (ROE)
- Return on equity followed a similar pattern to the profit margins. It decreased from 34.17% in 2021 to 31.57% in 2022, then plummeted to 0.97% in 2023. A substantial increase was then recorded, with ROE reaching 36.96% in 2024 and 34.70% in 2025. This indicates a significant impact on shareholder returns in 2023, followed by a strong recovery.
- Return on Assets (ROA)
- Return on assets also experienced a decline in 2023, falling to 0.34% from 12.35% in 2021 and 13.30% in 2022. The ratio then increased to 14.62% in 2024 and 13.34% in 2025. This suggests that the company’s ability to generate profit from its assets was significantly impaired in 2023, but improved in subsequent years.
In summary, the period under review was characterized by a notable disruption to profitability in 2023, followed by a robust recovery and continued improvement through 2025. The consistency of this pattern across all five ratios suggests a systemic factor influenced performance during this time.
Return on Sales
Return on Investment
Gross Profit Margin
Merck & Co. Inc., gross profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Gross profit | ||||||
| Sales | ||||||
| Profitability Ratio | ||||||
| Gross profit margin1 | ||||||
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Gross profit margin = 100 × Gross profit ÷ Sales
= 100 × ÷ =
2 Click competitor name to see calculations.
The gross profit margin exhibited a fluctuating, yet generally positive, trend over the five-year period. While gross profit increased consistently, the gross profit margin experienced both increases and decreases, indicating a dynamic relationship between revenue and the cost of goods sold.
- Gross Profit
- Gross profit demonstrated a consistent upward trajectory, increasing from US$35,078 million in 2021 to US$48,629 million in 2025. This represents a substantial overall increase, suggesting effective management of production costs or increased pricing power.
- Sales
- Sales also increased steadily throughout the period, rising from US$48,704 million in 2021 to US$65,011 million in 2025. The growth in sales contributed significantly to the increase in gross profit.
- Gross Profit Margin
- The gross profit margin began at 72.02% in 2021, then decreased to 70.63% in 2022. A subsequent increase was observed in 2023, reaching 73.17%. The margin peaked at 76.32% in 2024 before slightly declining to 74.80% in 2025. The 2024 peak suggests improved efficiency in production or a favorable shift in the product mix. The slight decrease in 2025, despite continued growth in both sales and gross profit, warrants further investigation to determine the underlying cause, such as increased input costs or pricing pressures.
Overall, the company demonstrates a strong ability to generate profit from its sales. The fluctuations in the gross profit margin, while generally positive, suggest a sensitivity to factors impacting either sales prices or the cost of goods sold. Continued monitoring of these factors is recommended.
Operating Profit Margin
Merck & Co. Inc., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Operating income | ||||||
| Sales | ||||||
| Profitability Ratio | ||||||
| Operating profit margin1 | ||||||
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
| Operating Profit Margin, Sector | ||||||
| Pharmaceuticals, Biotechnology & Life Sciences | ||||||
| Operating Profit Margin, Industry | ||||||
| Health Care | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Operating profit margin = 100 × Operating income ÷ Sales
= 100 × ÷ =
2 Click competitor name to see calculations.
The operating profit margin exhibited significant fluctuation over the five-year period. Initial values demonstrated strong profitability, followed by a substantial decline, and then a recovery culminating in consistent growth.
- Operating Profit Margin - Overall Trend
- The operating profit margin began at 25.74% in 2021, increasing to a peak of 30.27% in 2022. A dramatic decrease was then observed in 2023, with the margin falling to 3.92%. Subsequently, the margin rebounded strongly, reaching 31.03% in 2024 and continuing to rise to 32.64% in 2025.
- Operating Profit Margin - 2021 to 2022
- From 2021 to 2022, the operating profit margin increased by 4.53 percentage points. This improvement coincided with a notable increase in sales, from US$48,704 million to US$59,283 million, and a larger increase in operating income, from US$12,538 million to US$17,945 million. This suggests improved operational efficiency and/or pricing power during this period.
- Operating Profit Margin - 2022 to 2023
- The period between 2022 and 2023 saw a precipitous decline in the operating profit margin, decreasing by 26.35 percentage points. While sales experienced a modest increase, from US$59,283 million to US$60,115 million, operating income decreased significantly, falling from US$17,945 million to US$2,355 million. This substantial reduction in operating income appears to be the primary driver of the margin contraction.
- Operating Profit Margin - 2023 to 2025
- From 2023 to 2025, the operating profit margin demonstrated a strong recovery and continued growth. The margin increased by 27.11 percentage points over this period, reaching 32.64% in 2025. This improvement was supported by increases in both sales, from US$60,115 million to US$65,011 million, and operating income, which rose from US$2,355 million to US$21,218 million. The growth in operating income outpaced the growth in sales, indicating improved profitability.
The volatility in the operating profit margin suggests potential sensitivity to underlying cost structures or significant one-time events impacting operating income. The recent upward trend indicates a strengthening of operational performance and improved profitability.
Net Profit Margin
Merck & Co. Inc., net profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to Merck & Co., Inc. | ||||||
| Sales | ||||||
| Profitability Ratio | ||||||
| Net profit margin1 | ||||||
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
| Net Profit Margin, Sector | ||||||
| Pharmaceuticals, Biotechnology & Life Sciences | ||||||
| Net Profit Margin, Industry | ||||||
| Health Care | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Net profit margin = 100 × Net income attributable to Merck & Co., Inc. ÷ Sales
= 100 × ÷ =
2 Click competitor name to see calculations.
The net profit margin exhibited considerable fluctuation over the five-year period. Initial values were strong, followed by a significant decline, and then a recovery culminating in a peak at the end of the observed timeframe.
- Net Profit Margin - Overall Trend
- The net profit margin began at 26.79% in 2021, decreased to 24.49% in 2022, and experienced a dramatic reduction to 0.61% in 2023. A substantial recovery was then observed, with the margin increasing to 26.68% in 2024 and further to 28.08% in 2025. This indicates a period of profitability challenges followed by a strong rebound.
The substantial decline in net profit margin in 2023 warrants further investigation. While sales remained relatively stable between 2022 and 2023, net income attributable to Merck & Co., Inc. decreased significantly, suggesting a considerable increase in costs or other expenses that impacted profitability.
- Relationship to Sales
- Sales demonstrated a consistent upward trend throughout the period, increasing from US$48,704 million in 2021 to US$65,011 million in 2025. However, the net profit margin did not consistently follow this trend. The decoupling of sales growth and margin performance in 2023 highlights the importance of cost management and operational efficiency.
The recovery in net profit margin during 2024 and 2025, alongside continued sales growth, suggests successful implementation of strategies to improve profitability. The margin reaching a high of 28.08% in 2025 indicates improved cost control or pricing power.
- Net Income Volatility
- Net income attributable to Merck & Co., Inc. was highly volatile. The large decrease from US$14,519 million in 2022 to US$365 million in 2023 directly drove the margin decline. The subsequent increase to US$17,117 million in 2024 and US$18,254 million in 2025 demonstrates a return to stronger earnings.
Return on Equity (ROE)
Merck & Co. Inc., ROE calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to Merck & Co., Inc. | ||||||
| Total Merck & Co., Inc. stockholders’ equity | ||||||
| Profitability Ratio | ||||||
| ROE1 | ||||||
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
| ROE, Sector | ||||||
| Pharmaceuticals, Biotechnology & Life Sciences | ||||||
| ROE, Industry | ||||||
| Health Care | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
ROE = 100 × Net income attributable to Merck & Co., Inc. ÷ Total Merck & Co., Inc. stockholders’ equity
= 100 × ÷ =
2 Click competitor name to see calculations.
The Return on Equity (ROE) exhibited considerable fluctuation over the five-year period. Initial values were strong, followed by a significant decline, and then a recovery, ultimately stabilizing at a level comparable to the initial period.
- Overall Trend
- The ROE began at 34.17% in 2021, decreased to 31.57% in 2022, and experienced a dramatic drop to 0.97% in 2023. A substantial increase was then observed in 2024, reaching 36.96%, followed by a slight decrease to 34.70% in 2025. This pattern indicates a period of instability followed by a return towards initial performance levels.
- Net Income Impact
- Net income attributable to Merck & Co., Inc. increased from US$13,049 million in 2021 to US$14,519 million in 2022. However, it fell sharply to US$365 million in 2023, which directly contributed to the low ROE observed in that year. Subsequent increases in net income to US$17,117 million in 2024 and US$18,254 million in 2025 aligned with the recovery and stabilization of the ROE.
- Stockholders’ Equity Impact
- Total Merck & Co., Inc. stockholders’ equity increased from US$38,184 million in 2021 to US$45,991 million in 2022. It then decreased to US$37,581 million in 2023, potentially exacerbating the impact of the lower net income on ROE. Equity increased again in 2024 to US$46,313 million and continued to rise to US$52,606 million in 2025. The growth in equity in the later years, while positive overall, may have partially offset the impact of increasing net income on the ROE, contributing to the slight decrease observed from 2024 to 2025.
The significant volatility in ROE suggests that the company’s profitability relative to shareholder equity was subject to substantial changes during the period. The recovery in 2024 and 2025 indicates a return to more favorable performance, but the underlying factors causing the 2023 decline warrant further investigation.
Return on Assets (ROA)
Merck & Co. Inc., ROA calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to Merck & Co., Inc. | ||||||
| Total assets | ||||||
| Profitability Ratio | ||||||
| ROA1 | ||||||
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
| ROA, Sector | ||||||
| Pharmaceuticals, Biotechnology & Life Sciences | ||||||
| ROA, Industry | ||||||
| Health Care | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
ROA = 100 × Net income attributable to Merck & Co., Inc. ÷ Total assets
= 100 × ÷ =
2 Click competitor name to see calculations.
The Return on Assets (ROA) exhibited significant fluctuation over the five-year period. Initial values demonstrated a positive trend, followed by a substantial decline, and then a recovery, ultimately stabilizing. A detailed examination of the ROA and its underlying components reveals key insights into the company’s performance.
- Overall Trend
- The ROA began at 12.35% in 2021 and increased to 13.30% in 2022, indicating improved profitability relative to asset utilization. However, a dramatic decrease occurred in 2023, with the ROA falling to 0.34%. This was followed by a strong rebound in 2024, reaching 14.62%, and a slight decrease to 13.34% in 2025.
- Key Observations
- The substantial decline in ROA during 2023 warrants further investigation. While net income decreased significantly in 2023, total assets also experienced a reduction, partially mitigating the impact. The subsequent increase in ROA in 2024 is attributable to a considerable rise in net income, coupled with a further increase in total assets. The slight decrease in ROA in 2025, despite continued growth in net income, suggests that asset growth outpaced the growth in profitability.
- Net Income and Asset Relationship
- The ROA’s volatility is closely linked to the fluctuations in net income. The significant drop in net income in 2023 directly contributed to the low ROA observed that year. Conversely, the substantial increase in net income in 2024 drove the ROA to its highest point during the analyzed period. The consistent growth in total assets throughout the period also plays a role, influencing the efficiency with which assets are used to generate profit.
In conclusion, the ROA demonstrates a complex pattern influenced by both profitability and asset management. The significant variations observed highlight the importance of monitoring both net income and asset levels to understand the drivers of the company’s return on assets.