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Merck & Co. Inc. (MRK)

Price to FCFE (P/FCFE)

Difficulty: Intermediate

Free Cash Flow to Equity (FCFE)

Merck & Co. Inc., FCFE calculation

US$ in millions

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12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net income attributable to Merck & Co., Inc. 6,220  2,394  3,920  4,442  11,920 
Net (income) loss attributable to noncontrolling interests (27) 24  21  17  14 
Net noncash charges 6,282  9,050  9,036  8,230  (5,898)
Net changes in assets and liabilities (1,553) (5,021) (2,601) (268) 1,824 
Net cash provided by operating activities 10,922  6,447  10,376  12,421  7,860 
Capital expenditures (2,615) (1,888) (1,614) (1,283) (1,317)
Net change in short-term borrowings 5,124  (26) —  (1,540) (460)
Payments on debt (4,287) (1,103) (2,386) (2,906) (6,617)
Proceeds from issuance of debt —  —  1,079  7,938  3,146 
Free cash flow to equity (FCFE) 9,144  3,430  7,455  14,630  2,612 

Based on: 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), 10-K (filing date: 2015-02-27).

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 declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

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 2,560,374,643
Selected Financial Data (US$)
Free cash flow to equity (FCFE) (in millions) 9,144 
FCFE per share 3.57
Current share price (P) 84.34
Valuation Ratio
P/FCFE 23.62
Benchmarks
P/FCFE, Competitors1
Abbott Laboratories —
AbbVie Inc. 6.81
Allergan PLC —
Amgen Inc. 12.76
Biogen Inc. 7.61
Bristol-Myers Squibb Co. 19.01
Celgene Corp. 7.67
Eli Lilly & Co. 29.16
Gilead Sciences Inc. 66.10
Johnson & Johnson 23.77
Pfizer Inc. 15.73
Regeneron Pharmaceuticals Inc. 18.23
P/FCFE, Sector
Pharmaceuticals & Biotechnology 19.24
P/FCFE, Industry
Health Care 21.12

Based on: 10-K (filing date: 2019-02-27).

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, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
No. shares of common stock outstanding1 2,581,220,308 2,696,190,502 2,745,571,067 2,775,258,591 2,838,192,933
Selected Financial Data (US$)
Free cash flow to equity (FCFE) (in millions)2 9,144  3,430  7,455  14,630  2,612 
FCFE per share3 3.54 1.27 2.72 5.27 0.92
Share price1, 4 80.62 54.72 65.87 50.64 58.54
Valuation Ratio
P/FCFE5 22.76 43.01 24.26 9.61 63.61
Benchmarks
P/FCFE, Competitors6
Abbott Laboratories — 70.38 5.13 18.90 21.25
AbbVie Inc. 7.33 19.98 8.15 3.73 35.01
Allergan PLC — 26.66 — 4.09 15.16
Amgen Inc. 12.46 11.98 9.37 11.59 17.65
Biogen Inc. 12.11 34.09 15.05 6.58 34.98
Bristol-Myers Squibb Co. 18.62 20.01 52.51 — 45.57
Celgene Corp. 6.78 10.96 24.05 8.20 21.11
Eli Lilly & Co. 35.24 11.21 13.88 49.65 13.49
Gilead Sciences Inc. 67.92 5.70 4.79 4.29 10.09
Johnson & Johnson 24.90 14.21 14.18 16.84 17.94
Pfizer Inc. 18.96 16.06 12.30 12.81 13.27
Regeneron Pharmaceuticals Inc. 24.51 32.42 41.47 75.10 218.80
P/FCFE, Sector
Pharmaceuticals & Biotechnology 20.31 15.67 13.54 9.16 19.14
P/FCFE, Industry
Health Care 21.84 15.92 14.70 8.44 18.06

Based on: 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), 10-K (filing date: 2015-02-27).

1 Data adjusted for splits and stock dividends.

2 See details »

3 2018 Calculation
FCFE per share = FCFE ÷ No. shares of common stock outstanding
= 9,144,000,000 ÷ 2,581,220,308 = 3.54

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

5 2018 Calculation
P/FCFE = Share price ÷ FCFE per share
= 80.62 ÷ 3.54 = 22.76

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 increased from 2016 to 2017 but then declined significantly from 2017 to 2018.