DCF Studio

    MRK.DE · GER · Healthcare

    Merck KGaA

    Also onConsensus Drift

    Implied value per share

    EUR 83.82

    Market price

    EUR 129.85

    Implied upside

    -35.5%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    NoteRisk-free rate is an assumption: EUR assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    EUR 83.82-35.5%
    Exit multiple
    EUR 109.91-15.4%
    Market price
    EUR 129.85

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (EUR). Outflows negative.

    0bn1bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayEUR
    LineFY26FY27FY28FY29FY30CAGR
    RevenueEUR 20.7bnEUR 20.4bnEUR 20.0bnEUR 19.7bnEUR 19.3bn-1.7%
    EBITEUR 3.9bnEUR 3.8bnEUR 3.7bnEUR 3.7bnEUR 3.6bn-1.7%
    NOPATEUR 3.1bnEUR 3.0bnEUR 3.0bnEUR 2.9bnEUR 2.8bn-1.7%
    Add depreciation & amortisationEUR 2.0bnEUR 2.0bnEUR 2.0bnEUR 1.9bnEUR 1.9bn-1.7%
    Less capital expenditureEUR -1.9bnEUR -1.9bnEUR -1.9bnEUR -1.8bnEUR -1.8bn-1.7%
    Less increase in working capitalEUR -207.6mEUR -204.0mEUR -200.5mEUR -197.0mEUR -193.6m-1.7%
    Free cashflow to firmEUR 2.9bnEUR 2.9bnEUR 2.8bnEUR 2.8bnEUR 2.7bn-1.7%
    Discount factor0.96710.90440.84580.79100.7397-
    Present valueEUR 2.8bnEUR 2.6bnEUR 2.4bnEUR 2.2bnEUR 2.0bn-8.1%
    Present Value Of The ForecastEUR 12.1bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate2.60%EUR assumption - no free live source available for this market (assumption)
    Equity risk premium6.00%Market assumption
    Beta0.869Reported 0.805, pulled toward 1.0 (Blume)
    Cost of equity7.82%Risk-free + beta x equity risk premium
    Cost of debt3.47%Interest expense / average total debt
    Market capitalisationEUR 56.5bn82.5% of capital
    Total debtEUR 12.0bn17.5% of capital, book value as a proxy
    Tax rate21.1%Effective, capped at statutory
    WACC6.93%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 shareEUR 83.82

    73% of EV

    Forecast FCFF, final year
    EUR 2.7bn
    Capex at depreciation, working capital in reinvestment
    EUR 2.8bn
    Less reinvestment at g/ROIC (31.5% of NOPAT)
    EUR -899.0m
    Capitalised
    EUR 2.0bn
    ROIC (reported)
    7.9%
    Terminal value, undiscounted
    EUR 45.1bn
    Terminal value, discounted
    EUR 33.4bn
    Enterprise value
    EUR 45.5bn
    Less net debt
    EUR 9.0bn
    Equity value
    EUR 36.4bn

    Exit at 11.0x EBITDA

    Value per shareEUR 109.91

    79% of EV

    Terminal value, undiscounted
    EUR 60.5bn
    Terminal value, discounted
    EUR 44.7bn
    Enterprise value
    EUR 56.8bn
    Less net debt
    EUR 9.0bn
    Equity value
    EUR 47.8bn

    Spread between methods: 27%.

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.93%134.93145.68160.72183.39221.67
    5.93%101.59105.79111.11118.15127.94
    6.93%80.5082.0283.8285.9988.71
    7.93%65.9466.2366.5266.8267.11
    8.93%56.5556.8057.0557.3057.55

    Outlined: this model. Green text: above today's price of 129.85. 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.

    InputModelImpliedGap
    Revenue growth, every year-1.7%5.2%+6.9pp
    EBIT margin18.7%26.8%+8.1pp
    Discount rate6.9%5.5%-1.5pp
    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.