Stock Analysis on Net

Merck & Co. Inc. (NYSE:MRK)

Economic Value Added (EVA)

Microsoft Excel

Economic Profit

Merck & Co. Inc., economic profit calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Net operating profit after taxes (NOPAT)1 16,744 (714) 14,154 13,349 6,669
Cost of capital2 7.70% 7.90% 7.88% 7.44% 7.39%
Invested capital3 79,426 69,966 73,942 70,735 57,182
 
Economic profit4 10,627 (6,242) 8,326 8,083 2,441

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 16,7447.70% × 79,426 = 10,627

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Merck & Co. Inc. economic profit decreased from 2022 to 2023 but then increased from 2023 to 2024 exceeding 2022 level.

Net Operating Profit after Taxes (NOPAT)

Merck & Co. Inc., NOPAT calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Net income attributable to Merck & Co., Inc. 17,117 365 14,519 13,049 7,067
Deferred income tax expense (benefit)1 (1,249) (1,899) (1,568) 187 (668)
Increase (decrease) in allowance for doubtful accounts2 1 16 10 (5) (1)
Increase (decrease) in LIFO reserve3 278 269 277 (65) (89)
Increase (decrease) in restructuring reserves4 (148) 199 (124) 51 (156)
Increase (decrease) in equity equivalents5 (1,118) (1,415) (1,405) 168 (914)
Interest expense 1,271 1,146 962 806 831
Interest expense, operating lease liability6 37 40 40 40 47
Adjusted interest expense 1,308 1,186 1,002 846 878
Tax benefit of interest expense7 (275) (249) (210) (178) (184)
Adjusted interest expense, after taxes8 1,033 937 792 668 693
(Gain) loss on marketable securities 30 (411) 462 232 (184)
Interest income (415) (365) (157) (36) (59)
Investment income, before taxes (385) (776) 305 196 (243)
Tax expense (benefit) of investment income9 81 163 (64) (41) 51
Investment income, after taxes10 (304) (613) 241 155 (192)
(Income) loss from discontinued operations, net of tax11 (704)
Net income (loss) attributable to noncontrolling interest 16 12 7 13 15
Net operating profit after taxes (NOPAT) 16,744 (714) 14,154 13,349 6,669

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowance for doubtful accounts.

3 Addition of increase (decrease) in LIFO reserve. See details »

4 Addition of increase (decrease) in restructuring reserves.

5 Addition of increase (decrease) in equity equivalents to net income attributable to Merck & Co., Inc..

6 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,159 × 3.20% = 37

7 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 1,308 × 21.00% = 275

8 Addition of after taxes interest expense to net income attributable to Merck & Co., Inc..

9 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 385 × 21.00% = 81

10 Elimination of after taxes investment income.

11 Elimination of discontinued operations.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Merck & Co. Inc. NOPAT decreased from 2022 to 2023 but then increased from 2023 to 2024 exceeding 2022 level.

Cash Operating Taxes

Merck & Co. Inc., cash operating taxes calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Taxes on income from continuing operations 2,803 1,512 1,918 1,521 1,709
Less: Deferred income tax expense (benefit) (1,249) (1,899) (1,568) 187 (668)
Add: Tax savings from interest expense 275 249 210 178 184
Less: Tax imposed on investment income 81 163 (64) (41) 51
Cash operating taxes 4,246 3,497 3,760 1,553 2,510

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Merck & Co. Inc. cash operating taxes decreased from 2022 to 2023 but then increased from 2023 to 2024 exceeding 2022 level.

Invested Capital

Merck & Co. Inc., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Loans payable and current portion of long-term debt 2,649 1,372 1,946 2,412 6,431
Long-term debt, excluding current portion 34,462 33,683 28,745 30,690 25,360
Operating lease liability1 1,159 1,213 1,294 1,529 1,662
Total reported debt & leases 38,270 36,268 31,985 34,631 33,453
Total Merck & Co., Inc. stockholders’ equity 46,313 37,581 45,991 38,184 25,317
Net deferred tax (assets) liabilities2 (2,214) (1,097) 1,292 2,749 121
Allowance for doubtful accounts3 89 88 72 62 85
LIFO reserve4 840 562 293 16 82
Restructuring reserves5 564 712 513 637 603
Equity equivalents6 (721) 265 2,170 3,464 891
Accumulated other comprehensive (income) loss, net of tax7 4,945 5,161 4,768 4,429 6,634
Noncontrolling interests 59 54 67 73 87
Adjusted total Merck & Co., Inc. stockholders’ equity 50,596 43,061 52,996 46,150 32,929
Construction in progress8 (7,984) (8,262) (9,186) (8,313) (7,324)
Investments in debt and publicly traded equity securities9 (1,456) (1,101) (1,853) (1,733) (1,876)
Invested capital 79,426 69,966 73,942 70,735 57,182

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of allowance for doubtful accounts receivable.

4 Addition of LIFO reserve. See details »

5 Addition of restructuring reserves.

6 Addition of equity equivalents to total Merck & Co., Inc. stockholders’ equity.

7 Removal of accumulated other comprehensive income.

8 Subtraction of construction in progress.

9 Subtraction of investments in debt and publicly traded equity securities.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Merck & Co. Inc. invested capital decreased from 2022 to 2023 but then increased from 2023 to 2024 exceeding 2022 level.

Cost of Capital

Merck & Co. Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 230,955 230,955 ÷ 264,714 = 0.87 0.87 × 8.44% = 7.36%
Loans payable and long-term debt, including current portion3 32,600 32,600 ÷ 264,714 = 0.12 0.12 × 3.39% × (1 – 21.00%) = 0.33%
Operating lease liability4 1,159 1,159 ÷ 264,714 = 0.00 0.00 × 3.20% × (1 – 21.00%) = 0.01%
Total: 264,714 1.00 7.70%

Based on: 10-K (reporting date: 2024-12-31).

1 US$ in millions

2 Equity. See details »

3 Loans payable and long-term debt, including current portion. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 326,306 326,306 ÷ 359,519 = 0.91 0.91 × 8.44% = 7.66%
Loans payable and long-term debt, including current portion3 32,000 32,000 ÷ 359,519 = 0.09 0.09 × 3.32% × (1 – 21.00%) = 0.23%
Operating lease liability4 1,213 1,213 ÷ 359,519 = 0.00 0.00 × 3.30% × (1 – 21.00%) = 0.01%
Total: 359,519 1.00 7.90%

Based on: 10-K (reporting date: 2023-12-31).

1 US$ in millions

2 Equity. See details »

3 Loans payable and long-term debt, including current portion. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 278,966 278,966 ÷ 306,960 = 0.91 0.91 × 8.44% = 7.67%
Loans payable and long-term debt, including current portion3 26,700 26,700 ÷ 306,960 = 0.09 0.09 × 2.95% × (1 – 21.00%) = 0.20%
Operating lease liability4 1,294 1,294 ÷ 306,960 = 0.00 0.00 × 3.10% × (1 – 21.00%) = 0.01%
Total: 306,960 1.00 7.88%

Based on: 10-K (reporting date: 2022-12-31).

1 US$ in millions

2 Equity. See details »

3 Loans payable and long-term debt, including current portion. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 192,917 192,917 ÷ 230,146 = 0.84 0.84 × 8.44% = 7.07%
Loans payable and long-term debt, including current portion3 35,700 35,700 ÷ 230,146 = 0.16 0.16 × 2.92% × (1 – 21.00%) = 0.36%
Operating lease liability4 1,529 1,529 ÷ 230,146 = 0.01 0.01 × 2.60% × (1 – 21.00%) = 0.01%
Total: 230,146 1.00 7.44%

Based on: 10-K (reporting date: 2021-12-31).

1 US$ in millions

2 Equity. See details »

3 Loans payable and long-term debt, including current portion. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 188,812 188,812 ÷ 226,474 = 0.83 0.83 × 8.44% = 7.03%
Loans payable and long-term debt, including current portion3 36,000 36,000 ÷ 226,474 = 0.16 0.16 × 2.74% × (1 – 21.00%) = 0.34%
Operating lease liability4 1,662 1,662 ÷ 226,474 = 0.01 0.01 × 2.80% × (1 – 21.00%) = 0.02%
Total: 226,474 1.00 7.39%

Based on: 10-K (reporting date: 2020-12-31).

1 US$ in millions

2 Equity. See details »

3 Loans payable and long-term debt, including current portion. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Merck & Co. Inc., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data (US$ in millions)
Economic profit1 10,627 (6,242) 8,326 8,083 2,441
Invested capital2 79,426 69,966 73,942 70,735 57,182
Performance Ratio
Economic spread ratio3 13.38% -8.92% 11.26% 11.43% 4.27%
Benchmarks
Economic Spread Ratio, Competitors4
AbbVie Inc. -2.94% -4.65% 4.79% 4.23% -3.55%
Amgen Inc. -0.04% 2.76% 7.34% 7.32% 11.64%
Bristol-Myers Squibb Co. -22.32% 1.23% -1.56% 0.76% -14.75%
Danaher Corp. -7.79% -8.54% -3.58% -2.89% -4.27%
Eli Lilly & Co. 15.12% 1.97% 9.33% 11.06% 17.74%
Gilead Sciences Inc. -7.72% 5.41% 2.36% 9.07% -4.00%
Johnson & Johnson 1.51% -0.35% 4.92% 9.98% 4.78%
Pfizer Inc. -3.47% -9.56% 17.87% 11.05% -3.61%
Regeneron Pharmaceuticals Inc. 21.22% 18.06% 23.41% 67.10% 38.60%
Thermo Fisher Scientific Inc. -4.59% -5.09% -3.31% -1.44% -0.49%
Vertex Pharmaceuticals Inc. -22.64% 11.31% 14.06% 15.27% 28.54%

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 Economic profit. See details »

2 Invested capital. See details »

3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 10,627 ÷ 79,426 = 13.38%

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Merck & Co. Inc. economic spread ratio deteriorated from 2022 to 2023 but then improved from 2023 to 2024 exceeding 2022 level.

Economic Profit Margin

Merck & Co. Inc., economic profit margin calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data (US$ in millions)
Economic profit1 10,627 (6,242) 8,326 8,083 2,441
Sales 64,168 60,115 59,283 48,704 47,994
Performance Ratio
Economic profit margin2 16.56% -10.38% 14.04% 16.60% 5.09%
Benchmarks
Economic Profit Margin, Competitors3
AbbVie Inc. -3.61% -5.84% 6.77% 7.22% -8.04%
Amgen Inc. -0.08% 7.18% 11.75% 12.12% 18.62%
Bristol-Myers Squibb Co. -28.96% 1.85% -2.43% 1.32% -31.28%
Danaher Corp. -24.04% -28.04% -8.89% -7.21% -12.52%
Eli Lilly & Co. 12.02% 1.70% 7.95% 10.21% 17.76%
Gilead Sciences Inc. -11.96% 9.20% 3.99% 16.05% -8.25%
Johnson & Johnson 1.81% -0.41% 5.90% 10.44% 5.69%
Pfizer Inc. -7.40% -24.86% 19.56% 11.79% -8.80%
Regeneron Pharmaceuticals Inc. 18.61% 16.47% 23.57% 45.37% 37.61%
Thermo Fisher Scientific Inc. -8.78% -10.16% -6.11% -2.93% -0.92%
Vertex Pharmaceuticals Inc. -18.58% 15.17% 20.74% 18.92% 37.46%

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 Economic profit. See details »

2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Sales
= 100 × 10,627 ÷ 64,168 = 16.56%

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Merck & Co. Inc. economic profit margin deteriorated from 2022 to 2023 but then improved from 2023 to 2024 exceeding 2022 level.