DCF Studio

    MRK · NYQ · Healthcare

    Merck & Co., Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 147.65

    Market price

    USD 148.36

    Implied upside

    -0.5%

    10-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · Price 2026-11-02 · Accounts to 2025-12-31

    Value Per Share

    Perpetuity growth
    USD 147.65-0.5%
    Exit multiple
    USD 126.33-14.8%
    Market price
    USD 148.36

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn10bn19bnFY26FY27FY28FY29FY30FY31FY32FY33FY34FY35
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30FY31FY32FY33FY34FY35CAGR
    RevenueUSD 67.2bnUSD 69.5bnUSD 71.8bnUSD 74.0bnUSD 76.3bnUSD 78.6bnUSD 80.8bnUSD 83.0bnUSD 85.2bnUSD 87.3bn+3.0%
    EBITUSD 17.0bnUSD 17.6bnUSD 18.2bnUSD 18.7bnUSD 19.3bnUSD 19.9bnUSD 20.5bnUSD 21.0bnUSD 21.6bnUSD 22.1bn+3.0%
    NOPATUSD 14.7bnUSD 15.2bnUSD 15.7bnUSD 16.2bnUSD 16.7bnUSD 17.2bnUSD 17.7bnUSD 18.1bnUSD 18.6bnUSD 19.1bn+3.0%
    Add depreciation & amortisationUSD 4.9bnUSD 5.0bnUSD 5.2bnUSD 5.4bnUSD 5.5bnUSD 5.7bnUSD 5.9bnUSD 6.0bnUSD 6.2bnUSD 6.3bn+3.0%
    Less capital expenditureUSD -4.3bnUSD -4.4bnUSD -4.6bnUSD -4.8bnUSD -5.0bnUSD -5.1bnUSD -5.3bnUSD -5.5bnUSD -5.7bnUSD -5.9bn+3.6%
    Capex, % of revenue6.4%6.4%6.4%6.5%6.5%6.6%6.6%6.6%6.7%6.7%-
    Less increase in working capitalUSD -441.2mUSD -462.2mUSD -462.1mUSD -460.9mUSD -458.7mUSD -455.4mUSD -450.9mUSD -445.3mUSD -438.5mUSD -430.6m-0.3%
    Free cashflow to firmUSD 14.9bnUSD 15.3bnUSD 15.8bnUSD 16.3bnUSD 16.8bnUSD 17.3bnUSD 17.7bnUSD 18.2bnUSD 18.7bnUSD 19.1bn+2.8%
    Discount factor0.96950.91130.85660.80520.75690.71150.66880.62860.59090.5554-
    Present valueUSD 14.4bnUSD 14.0bnUSD 13.5bnUSD 13.1bnUSD 12.7bnUSD 12.3bnUSD 11.9bnUSD 11.4bnUSD 11.0bnUSD 10.6bn-
    Present Value Of The ForecastUSD 125.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.89%US 10-year Treasury (^TNX), 2026-11-02
    Equity risk premium4.23%Damodaran, January 2026
    Beta0.410Reported 0.120, pulled toward 1.0 (Blume)
    Cost of equity6.63%Risk-free + beta x equity risk premium
    Cost of debt5.29%Risk-free + 40bp, the spread for a AAA rating at 16.3x interest cover. Book interest / average debt was lower, at 3.1%.
    Market capitalisationUSD 366.0bn88.1% of capital
    Total debtUSD 49.3bn11.9% of capital, book value as a proxy
    Tax rate13.7%Effective, capped at statutory
    WACC6.39%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 147.65

    69% of EV

    Forecast FCFF, final year
    USD 19.1bn
    Capex at depreciation, working capital in reinvestment
    USD 21.9bn
    Less reinvestment at g/ROIC (12.7% of NOPAT)
    USD -2.8bn
    Capitalised
    USD 19.1bn
    ROIC (reported)
    19.6%
    Terminal value, undiscounted
    USD 504.0bn
    Terminal value, discounted
    USD 280.0bn
    Enterprise value
    USD 404.9bn
    Less net debt
    USD 34.8bn
    Equity value
    USD 370.2bn

    Exit at 14.3x EBITDA

    Value per shareUSD 126.33

    64% of EV

    Terminal value, undiscounted
    USD 407.8bn
    Terminal value, discounted
    USD 226.5bn
    Enterprise value
    USD 351.5bn
    Less net debt
    USD 34.8bn
    Equity value
    USD 316.7bn

    Spread between methods: 16%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.39%231.01264.60316.35405.90597.32
    5.39%167.74182.58202.77231.66276.20
    6.39%130.42137.99147.65160.34177.61
    7.39%105.81109.98115.10121.52129.72
    8.39%88.3890.7593.6297.10101.40

    Outlined: this model. Green text: above today's price of 148.36. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputActualModelImplied
    Revenue growth, a year3.1%3.0%3.0%
    EBIT margin34.0%25.3%25.4%
    Discount rate-6.4%6.4%
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.