Based on the aggregated intelligence of 170,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, drug behemoth Merck
With that in mind, let's take a closer look at Merck's business and see what CAPS investors are saying about the stock right now.
Merck facts
| Headquarters (founded) | Whitehouse Station, N.J. (1891) |
| Market Cap | $111 billion |
| Industry | Pharmaceuticals |
| Trailing-12-Month Revenue | $10.62 billion |
| Management | CEO Richard Clark (since 2005) CFO Peter Kellogg (since 2007) |
| Return on Equity (average, past 3 years) | 26.8% |
| Dividend Yield | 4.2% |
| Competitors |
GlaxoSmithKline Novartis Pfizer |
Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.
On CAPS, 93% of the 2,813 members who have rated Merck believe the stock will outperform the S&P 500 going forward. These bulls include contrarianjim and All-Star Caligiuri, who is ranked in the top 0.5% of our community.
Less than two months ago, contrarianjim tapped Merck as an income opportunity: "Ever seen a great company with a killer dividend? This is it. The pending fall-off of products is overstated. New Cholesterol drug will reboot this pharma bohemoth into $65 by 2013."
Shares of Merck had a pretty disappointing 2010, but many in our community believe it's an attractive long-term bet, going forward. Over the next five years, Merck is even expected to grow profits (5.8% per annum) at a slightly faster pace than big pharma stocks like Glaxo (3%), Novartis (5.1%), and Pfizer (2.9%), as well as Eli Lilly
CAPS All-Star Caligiuri thinks the shares are too cheap to pass up:
Merck is a powerhouse of a company in terms of size and profitability. It is worth over 55 billion dollars in book value on its balance sheets, and the profit margin and return on equity are over 17% and 20%, respectively.
While the stock market (S&P 500) has had an aggregate increase in value of 12.83% over the past 52 weeks, Merck has declined in value by 2.46%. I believe this is a sign of undervaluation because of the financial strength of Merck and because of its dividend. Merck pays a 4.2% dividend with only a 50% payout ratio.
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