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Merck & Co. Inc. (NYSE:MRK)

Price to FCFE (P/FCFE)

Intermediate level

Free Cash Flow to Equity (FCFE)

Merck & Co. Inc., FCFE calculation

US$ in millions

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12 months ended Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net income attributable to Merck & Co., Inc. 9,843  6,220  2,394  3,920  4,442 
Net (income) loss attributable to noncontrolling interests (66) (27) 24  21  17 
Net noncash charges 5,730  6,282  9,050  9,036  8,230 
Net changes in assets and liabilities (2,067) (1,553) (5,021) (2,601) (268)
Net cash provided by operating activities 13,440  10,922  6,447  10,376  12,421 
Capital expenditures (3,473) (2,615) (1,888) (1,614) (1,283)
Net change in short-term borrowings (3,710) 5,124  (26) —  (1,540)
Payments on debt —  (4,287) (1,103) (2,386) (2,906)
Proceeds from issuance of debt 4,958  —  —  1,079  7,938 
Free cash flow to equity (FCFE) 11,215  9,144  3,430  7,455  14,630 

Based on: 10-K (filing date: 2020-02-26), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-26).

Item Description The company
FCFE Free cash flow to equity is the cash flow available to Merck & Co. Inc.’s equity holders after all operating expenses, interest, and principal payments have been paid and necessary investments in working and fixed capital have been made. Merck & Co. Inc.’s FCFE increased from 2017 to 2018 and from 2018 to 2019.

Price to FCFE Ratio, Current

Merck & Co. Inc., current P/FCFE calculation, comparison to benchmarks

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No. shares of common stock outstanding 2,524,101,191
Selected Financial Data (US$)
Free cash flow to equity (FCFE) (in millions) 11,215 
FCFE per share 4.44
Current share price (P) 81.55
Valuation Ratio
P/FCFE 18.35
Benchmarks
P/FCFE, Competitors1
Abbott Laboratories 53.85
AbbVie Inc. 3.56
Allergan PLC 10.98
Amgen Inc. 32.34
Biogen Inc. 7.63
Bristol-Myers Squibb Co. 5.54
Eli Lilly & Co. 16.98
Gilead Sciences Inc. 17.47
Illumina Inc. 180.43
Johnson & Johnson 22.69
Pfizer Inc. 10.66
Regeneron Pharmaceuticals Inc. 33.67
Vertex Pharmaceuticals Inc. 48.29
Zoetis Inc. 50.33
P/FCFE, Sector
Pharmaceuticals & Biotechnology 13.21
P/FCFE, Industry
Health Care 14.34

Based on: 10-K (filing date: 2020-02-26).

1 Click competitor name to see calculations.

If the company P/FCFE is lower then the P/FCFE of benchmark then company is relatively undervalued.
Otherwise, if the company P/FCFE is higher then the P/FCFE of benchmark then company is relatively overvalued.

Price to FCFE Ratio, Historical

Merck & Co. Inc., historical P/FCFE calculation, comparison to benchmarks

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Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
No. shares of common stock outstanding1 2,536,268,760 2,581,220,308 2,696,190,502 2,745,571,067 2,775,258,591
Selected Financial Data (US$)
Free cash flow to equity (FCFE) (in millions)2 11,215  9,144  3,430  7,455  14,630 
FCFE per share3 4.42 3.54 1.27 2.72 5.27
Share price1, 4 79.94 80.62 54.72 65.87 50.64
Valuation Ratio
P/FCFE5 18.08 22.76 43.01 24.26 9.61
Benchmarks
P/FCFE, Competitors6
Abbott Laboratories 53.19 — 70.38 5.13 18.90
AbbVie Inc. 3.64 7.33 19.98 8.15 3.73
Allergan PLC 11.24 — 26.66 — 4.09
Amgen Inc. 33.32 12.46 11.98 9.37 11.59
Biogen Inc. 9.16 12.11 34.09 15.05 6.58
Bristol-Myers Squibb Co. 5.80 18.62 20.01 52.51 —
Eli Lilly & Co. 15.87 35.28 11.27 14.04 52.66
Gilead Sciences Inc. 15.91 67.92 5.70 4.79 4.29
Illumina Inc. 149.01 27.24 57.76 65.66 85.02
Johnson & Johnson 23.06 24.90 14.21 14.18 16.84
Pfizer Inc. 10.09 18.96 16.06 12.30 12.81
Regeneron Pharmaceuticals Inc. 21.00 24.51 32.42 41.47 75.10
Vertex Pharmaceuticals Inc. 42.50 40.75 135.82 125.60 —
Zoetis Inc. 51.91 13.91 23.76 291.75 12.58
P/FCFE, Sector
Pharmaceuticals & Biotechnology 12.92 22.08 16.69 13.76 9.56
P/FCFE, Industry
Health Care 14.13 23.56 17.27 14.96 8.53

Based on: 10-K (filing date: 2020-02-26), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-26).

1 Data adjusted for splits and stock dividends.

2 See details »

3 2019 Calculation
FCFE per share = FCFE ÷ No. shares of common stock outstanding
= 11,215,000,000 ÷ 2,536,268,760 = 4.42

4 Closing price as at the filing date of Merck & Co. Inc.’s Annual Report.

5 2019 Calculation
P/FCFE = Share price ÷ FCFE per share
= 79.94 ÷ 4.42 = 18.08

6 Click competitor name to see calculations.

Valuation ratio Description The company
P/FCFE Price to free cash flow to equity is cash valuation indicator of stockholders’ equity. Merck & Co. Inc.’s P/FCFE ratio decreased from 2017 to 2018 and from 2018 to 2019.