Merck (MRK): Assessing Valuation After a Strong Three-Month Share Price Rally

Merck (MRK) has outpaced the broader market recently, with shares up roughly 7% over the past month and more than 30% in the past 3 months. This performance has put its valuation firmly back in focus.

See our latest analysis for Merck.

Zooming out, Merck’s recent 90 day share price return of 31.84% and 1 year total shareholder return of 9.59% suggest momentum is clearly building rather than fading at its current share price of $105.04.

If Merck’s run has you rethinking the healthcare space, this could be a good moment to explore other healthcare stocks that might fit a similar long term thesis.

With earnings still growing faster than revenue and the stock trading just below analyst targets despite a powerful recent rally, the key question now is whether Merck remains undervalued or if the market is already pricing in its future growth.

Most Popular Narrative Narrative: 1.5% Undervalued

With Merck closing at $105.04 against a most popular narrative fair value of about $106.62, the story leans slightly in favor of upside potential.

The analysts have a consensus price target of $102.333 for Merck based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $141.0, and the most bearish reporting a price target of just $82.0.

Read the complete narrative.

Want to see how modest revenue growth, expanding margins and a richer future earnings multiple combine into that fair value call? Unpack the full framework behind this narrative.

Result: Fair Value of $106.62 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, Merck still faces looming Keytruda exclusivity loss and softening Gardasil demand in China, either of which could quickly challenge this modest undervaluation story.

Find out about the key risks to this Merck narrative.

Build Your Own Merck Narrative

If you see the story differently or want to dig into the numbers yourself, build a tailored Merck thesis in just a few minutes: Do it your way.

A great starting point for your Merck research is our analysis highlighting 5 key rewards and 2 important warning signs that could impact your investment decision.

Looking for more investment ideas?

Use the Simply Wall Street Screener to move beyond a single stock and quickly surface high conviction opportunities that match your strategy before the market catches on.

• Capture potential growth at attractive prices by reviewing these 908 undervalued stocks based on cash flows that may offer stronger upside than widely followed blue chips.
• Position your portfolio for transformative innovation with these 24 AI penny stocks shaping the next wave of intelligent technology.
• Strengthen your income stream through these 10 dividend stocks with yields > 3% that can help support dependable cash returns alongside capital appreciation.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com