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Common Stock Valuation Ratios (Price Multiples)

Difficulty: Beginner


Current Valuation Ratios

Merck & Co. Inc., current price multiples

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Merck & Co. Inc. Abbott Laboratories AbbVie Inc. Allergan PLC Amgen Inc. Biogen Inc. Bristol-Myers Squibb Co. Celgene Corp. Eli Lilly & Co. Gilead Sciences Inc. Johnson & Johnson Pfizer Inc. Regeneron Pharmaceuticals Inc. Pharmaceuticals & Biotechnology Health Care
Selected Financial Data
Current share price (P) $ 69.06
No. shares of common stock outstanding 2,659,525,311
Growth rate (g) -3.06%
 
Earnings per share (EPS) $ 0.90
Next year expected EPS $ 0.87
Operating profit per share $ 2.46
Sales per share $ 15.09
Book value per share (BVPS) $ 12.91
Ratios (Price Multiples)
Price to earnings (P/E) 76.72 238.03 28.18 64.57 27.39 98.67 21.62 20.43 277.50 11.58 33.74 42.65 36.71
Price to next year expected earnings 79.14 228.87 23.56 60.13 21.45 105.02 16.31 13.87 325.66 10.92 28.45 38.98 33.41
Price to operating profit (P/OP) 28.11 65.78 15.60 12.81 13.01 27.51 13.50 52.85 6.69 19.60 18.12 19.45 20.08 19.67
Price to sales (P/S) 4.58 4.15 5.30 3.95 5.86 5.67 4.78 4.90 4.96 3.68 4.72 4.70 6.89 4.76 3.18
Price to book value (P/BV) 5.35 3.67 29.36 0.85 5.06 5.51 8.46 9.18 9.78 4.62 6.00 3.46 6.58 4.66 4.42

If company price multiple is lower then the price multiple of benchmark then company stock is relatively undervalued.

Otherwise, if company price multiple is higher then the price multiple of benchmark then company stock is relatively overvalued.


Historical Valuation Ratios (Summary)

Merck & Co. Inc., historical price multiples

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Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Price to earnings (P/E) 61.63 46.14 31.64 13.94 37.83
Price to operating profit (P/OP) 22.58 33.62 20.29 29.30 27.97
Price to sales (P/S) 3.68 4.54 3.56 3.93 3.78
Price to book value (P/BV) 4.30 4.51 3.15 3.42 3.35
Ratio Description The company
P/E ratio The P/E ratio tells analyst how much an investor in common stock pays per dollar of current earnings. Merck & Co. Inc.'s P/E ratio increased from 2015 to 2016 and from 2016 to 2017.
P/OP ratio Because P/E ratio is calculated using net income, the ratio can be sensitive to nonrecurring earnings and capital structure, analysts may use price to operating profit. Merck & Co. Inc.'s P/OP ratio increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level.
P/S ratio An rationale for the P/S ratio is that sales, as the top line in an income statement, are generally less subject to distortion or manipulation than other fundamentals such as EPS or book value. Sales are also more stable than earnings and never negative. Merck & Co. Inc.'s P/S ratio increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level.
P/BV ratio The P/BV ratio is interpreted as an indicator of market judgment about the relationship between a company's required rate of return and its actual rate of return. Merck & Co. Inc.'s P/BV ratio increased from 2015 to 2016 but then slightly declined from 2016 to 2017.

Price to Earnings (P/E)

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

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Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
No. shares of common stock outstanding1 2,696,190,502 2,745,571,067 2,775,258,591 2,838,192,933 2,940,622,461
Selected Financial Data (USD $)
Net income attributable to Merck & Co., Inc. (in millions) 2,394  3,920  4,442  11,920  4,404 
Earnings per share (EPS)3 0.89 1.43 1.60 4.20 1.50
Share price1, 2 54.72 65.87 50.64 58.54 56.66
Ratio
P/E ratio4 61.63 46.14 31.64 13.94 37.83
Benchmarks
P/E Ratio, Competitors
Abbott Laboratories 220.29 55.16 12.83 31.30 23.25
AbbVie Inc. 35.47 16.54 17.01 55.08 19.64
Allergan PLC 5.60 31.94
Amgen Inc. 64.06 16.03 15.95 22.96 18.69
Biogen Inc. 28.83 15.41 16.67 31.27 38.21
Bristol-Myers Squibb Co. 103.55 20.56 64.22 49.80 35.01
Celgene Corp. 24.35 44.99 48.59 49.41 46.13
Eli Lilly & Co. 32.39 33.35 33.06 13.88
Gilead Sciences Inc. 22.75 6.83 6.75 12.85 42.00
Johnson & Johnson 268.10 20.08 18.80 17.15 18.72
Pfizer Inc. 9.99 28.10 26.37 23.03 9.32
Regeneron Pharmaceuticals Inc. 28.99 42.64 60.50 118.44 77.00
P/E Ratio, Sector
Pharmaceuticals & Biotechnology 40.95 18.35 19.56 23.76 20.82
P/E Ratio, Industry
Health Care 34.72 19.29 20.31 23.84 20.65

1 Data adjusted for splits and stock dividends.

2 Close price on the filing date of Merck & Co. Inc.'s Annual Report.

2017 Calculations

3 EPS = Net income attributable to Merck & Co., Inc. ÷ No. shares of common stock outstanding
= 2,394,000,000 ÷ 2,696,190,502 = 0.89

4 P/E ratio = Share price ÷ EPS
= 54.72 ÷ 0.89 = 61.63

Ratio Description The company
P/E ratio The P/E ratio tells analyst how much an investor in common stock pays per dollar of current earnings. Merck & Co. Inc.'s P/E ratio increased from 2015 to 2016 and from 2016 to 2017.

Price to Operating Profit (P/OP)

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

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Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
No. shares of common stock outstanding1 2,696,190,502 2,745,571,067 2,775,258,591 2,838,192,933 2,940,622,461
Selected Financial Data (USD $)
Operating income (in millions) 6,533  5,379  6,928  5,670  5,956 
Operating profit per share3 2.42 1.96 2.50 2.00 2.03
Share price1, 2 54.72 65.87 50.64 58.54 56.66
Ratio
P/OP ratio4 22.58 33.62 20.29 29.30 27.97
Benchmarks
P/OP Ratio, Competitors
Abbott Laboratories 60.88 24.25 19.80 27.50 22.79
AbbVie Inc. 19.63 10.49 11.61 28.64 14.31
Allergan PLC
Amgen Inc. 12.71 12.64 13.07 19.13 16.19
Biogen Inc. 13.70 11.08 12.09 23.10 28.29
Bristol-Myers Squibb Co. 28.87 19.79 53.18 38.52 28.98
Celgene Corp. 15.21 28.40 34.53 39.23 36.98
Eli Lilly & Co. 39.61 25.63 29.86 29.71 12.11
Gilead Sciences Inc. 7.45 5.23 5.50 10.19 28.54
Johnson & Johnson 18.94 16.09 16.50 13.36 14.09
Pfizer Inc. 15.62 16.88 15.52 15.88 13.50
Regeneron Pharmaceuticals Inc. 16.71 28.70 30.74 49.17 42.99
P/OP Ratio, Sector
Pharmaceuticals & Biotechnology 19.28 16.55 16.77 20.16 19.07
P/OP Ratio, Industry
Health Care 18.60 16.20 16.38 19.02 17.67

1 Data adjusted for splits and stock dividends.

2 Close price on the filing date of Merck & Co. Inc.'s Annual Report.

2017 Calculations

3 Operating profit per share = Operating income ÷ No. shares of common stock outstanding
= 6,533,000,000 ÷ 2,696,190,502 = 2.42

4 P/OP ratio = Share price ÷ Operating profit per share
= 54.72 ÷ 2.42 = 22.58

Ratio Description The company
P/OP ratio Because P/E ratio is calculated using net income, the ratio can be sensitive to nonrecurring earnings and capital structure, analysts may use price to operating profit. Merck & Co. Inc.'s P/OP ratio increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level.

Price to Sales (P/S)

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

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
No. shares of common stock outstanding1 2,696,190,502 2,745,571,067 2,775,258,591 2,838,192,933 2,940,622,461
Selected Financial Data (USD $)
Sales (in millions) 40,122  39,807  39,498  42,237  44,033 
Sales per share3 14.88 14.50 14.23 14.88 14.97
Share price1, 2 54.72 65.87 50.64 58.54 56.66
Ratio
P/S ratio4 3.68 4.54 3.56 3.93 3.78
Benchmarks
P/S Ratio, Competitors
Abbott Laboratories 3.84 3.70 2.78 3.53 2.74
AbbVie Inc. 6.67 3.84 3.83 4.90 4.31
Allergan PLC 3.40 5.65 7.81 5.79 4.52
Amgen Inc. 5.82 5.65 5.28 6.13 5.22
Biogen Inc. 5.96 4.98 5.49 9.46 10.26
Bristol-Myers Squibb Co. 5.02 4.72 6.07 6.28 5.48
Celgene Corp. 5.52 8.04 8.50 13.06 10.51
Eli Lilly & Co. 3.71 4.18 4.02 4.03 2.81
Gilead Sciences Inc. 4.10 3.08 3.80 6.36 11.95
Johnson & Johnson 4.56 4.62 4.13 3.77 3.63
Pfizer Inc. 4.05 3.84 3.76 4.24 3.97
Regeneron Pharmaceuticals Inc. 5.92 7.86 9.38 14.62 15.52
P/S Ratio, Sector
Pharmaceuticals & Biotechnology 4.57 4.50 4.43 4.97 4.53
P/S Ratio, Industry
Health Care 3.00 2.87 2.85 3.21 2.87

1 Data adjusted for splits and stock dividends.

2 Close price on the filing date of Merck & Co. Inc.'s Annual Report.

2017 Calculations

3 Sales per share = Sales ÷ No. shares of common stock outstanding
= 40,122,000,000 ÷ 2,696,190,502 = 14.88

4 P/S ratio = Share price ÷ Sales per share
= 54.72 ÷ 14.88 = 3.68

Ratio Description The company
P/S ratio An rationale for the P/S ratio is that sales, as the top line in an income statement, are generally less subject to distortion or manipulation than other fundamentals such as EPS or book value. Sales are also more stable than earnings and never negative. Merck & Co. Inc.'s P/S ratio increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level.

Price to Book Value (P/BV)

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

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
No. shares of common stock outstanding1 2,696,190,502 2,745,571,067 2,775,258,591 2,838,192,933 2,940,622,461
Selected Financial Data (USD $)
Total Merck & Co., Inc. stockholders' equity (in millions) 34,336  40,088  44,676  48,647  49,765 
Book value per share (BVPS)3 12.74 14.60 16.10 17.14 16.92
Share price1, 2 54.72 65.87 50.64 58.54 56.66
Ratio
P/BV ratio4 4.30 4.51 3.15 3.42 3.35
Benchmarks
P/BV Ratio, Competitors
Abbott Laboratories 3.40 3.76 2.68 3.32 2.38
AbbVie Inc. 36.95 21.24 22.17 56.09 18.05
Allergan PLC 0.73 1.08 1.54 2.67 4.11
Amgen Inc. 5.02 4.14 3.94 4.59 4.30
Biogen Inc. 5.80 4.70 6.31 8.49 8.25
Bristol-Myers Squibb Co. 8.88 5.66 7.04 6.72 5.92
Celgene Corp. 10.34 13.63 13.15 15.14 11.97
Eli Lilly & Co. 7.33 6.33 5.51 5.14 3.69
Gilead Sciences Inc. 5.15 4.88 6.59 10.08 11.36
Johnson & Johnson 5.79 4.72 4.07 4.01 3.50
Pfizer Inc. 2.98 3.40 2.84 2.95 2.69
Regeneron Pharmaceuticals Inc. 5.66 8.58 10.53 16.22 16.74
P/BV Ratio, Sector
Pharmaceuticals & Biotechnology 4.48 4.16 3.89 4.77 4.23
P/BV Ratio, Industry
Health Care 4.18 3.86 3.55 4.39 3.86

1 Data adjusted for splits and stock dividends.

2 Close price on the filing date of Merck & Co. Inc.'s Annual Report.

2017 Calculations

3 BVPS = Total Merck & Co., Inc. stockholders' equity ÷ No. shares of common stock outstanding
= 34,336,000,000 ÷ 2,696,190,502 = 12.74

4 P/BV ratio = Share price ÷ BVPS
= 54.72 ÷ 12.74 = 4.30

Ratio Description The company
P/BV ratio The P/BV ratio is interpreted as an indicator of market judgment about the relationship between a company's required rate of return and its actual rate of return. Merck & Co. Inc.'s P/BV ratio increased from 2015 to 2016 but then slightly declined from 2016 to 2017.