Signal Ledger LabSignal Ledger valuation · MRK
Merck & Co., Inc.
What the shares are worth today on our research (cited consensus, company plans and peers, since management sets no usable targets): every line valued at the end of FY2030, net debt rolled forward, then discounted back to Jun 30, 2026.
- Business value at FY2030
- $428B
- FY2030 revenue
- $75B
- FY2030 EPS · P/E
- $11.88 · 15×
- Discount rate (WACC · equity)
- 7.21% · 7.87%
How this is built. No usable company FY2030 sales promise: use cited FactSet company sales consensus, current company FY2026 guidance and rule-default margins; do not pull the mid 2030s pipeline opportunity into 2030. Each input below shows its basis: consensus, company plan, peer or rule.
Latest quarter in this research: Q2 2026
Reported Aug 4, 2026 for the quarter to Jun 30, 2026 (company release ↗). This valuation already reflects these results (researched Oct 23, 2026).
| Segment | Revenue | vs a year ago | Operating income | Margin |
|---|---|---|---|---|
| Pharmaceutical | $14.8B | +5% | — | — |
| Animal Health | $1.77B | +8% | — | — |
- Total sales 16.607B; KEYTRUDA family 8.366B includes QLEX0.463B; WINREVAIR0.588B.
- Q2 loss includes 5.7B Terns acquisition R&D charge; FY2026 tax guidance 35-36% includes non-deductible deals.
- Operating income is derived sales minus cost of sales,SG&A,R&D,restructuring:16.607-4.395-2.904-9.741-0.151=-0.584B. Company presents pretax profit, not a labeled operating subtotal.
- Segment profit is not full EBIT: human R&D, manufacturing and other costs are unallocated; segment operating-income fields left null.
What each business is worth
| Business | Model | FY2030 revenue | Value today | Per share | 2030 multiple | Value from beyond FY2030 |
|---|---|---|---|---|---|---|
| Pharmaceutical | Margin | $67B | $796B | $322.81 | 16.3× EBIT | 67% |
| Animal Health | Margin | $7.3B | $33B | $13.39 | 13.7× EBIT | 66% |
| Other disclosed revenues | Margin | $0.6B | $5.1B | $2.06 | 19.8× EBIT | 72% |
| Company costsHead-office costs no segment carries, valued as one negative business | Cost line | — | −$439B | −$178.01 | — | 71% |
| All businesses | $75B | $395B | $160.25 |
From 2030 back to today
- Enterprise value at end of FY2030$428B
- Plus net cash at FY2030$9.4B
- Equity value at FY2030$438B
- ÷ (1 + 7.87%)^4.5 years at the cost of equity$311B
- + dividends paid on the way, discounted$32B
This reconciliation checks the published Signal Ledger valuation against the net-debt path. The difference is 1.6%, inside our 5% tolerance.
From businesses to one share
- All businesses, valued today$395B
- − borrowings$54B
- − finance leases$0B
- − preferred and minority claims$0.1B
- + cash and short-term investments$7.1B
- ÷ diluted shares2.467B
- Signal Ledger valuation$141.28
Year by year to FY2030
| Fiscal year | Revenue | EBITDA | Capex | Free cash flow | Net debt at year end |
|---|---|---|---|---|---|
| FY2026 | $67B | $29B | $4.2B | $14B | $44B |
| FY2027 | $69B | $30B | $4.3B | $18B | $35B |
| FY2028 | $71B | $31B | $4.5B | $23B | $22B |
| FY2029 | $73B | $33B | $4.6B | $24B | $7.1B |
| FY2030 | $75B | $34B | $4.7B | $25B | $9.4B cash |
What must be true
- Pharmaceutical grows revenue from $59.6B in FY2026 to $67.1B in FY2030 (1.1×).
- Animal Health grows revenue from $6.9B in FY2026 to $7.3B in FY2030 (1.1×).
- Other disclosed revenues grows revenue from $0.3B in FY2026 to $0.6B in FY2030 (1.8×).
- Pharmaceutical raises its EBIT margin from 78.7% to 81.5%.
- Animal Health raises its EBIT margin from 33.5% to 36.4%.
- Other disclosed revenues raises its EBIT margin from 48.7% to 51.6%.
- The company spends $22.4B of capital expenditure through FY2030.
- Net debt peaks at $46.8B in FY2025 and stays financeable.
What the price implies
To reach $147.24 at our discount rate, Merck & Co., Inc. would need about $78.1B of FY2030 sales (growth of about 4.0% a year from FY2026) with 76.9% GAAP EBIT margin — versus $75.1B and 76.9% GAAP EBIT margin in our research.
At the research price of $147.24 (2026-10-23), the price asks more than our assumptions overall. These are operating requirements at that price, not additional valuations or forecasts.
If sales and margins changed together
Each row matches the same research price at our unchanged discount rate, by scaling every operating line's margin by one common factor. Sales cover margin and capacity lines only; other valuation lines stay fixed. Margins are revenue-weighted within each metric, before separately modeled corporate costs and eliminations. The conclusion uses the row at our research margins when sales alone can match the price, otherwise the solved row needing the least sales growth; this is a trade-off between growth and profitability, not a forecast.
| FY2030 sales factor | FY2030 sales | FY2026–30 CAGR | Required FY2030 margin | Requirement |
|---|---|---|---|---|
| 1.04×At research margins | $78.1B | 4.0% | 76.9% GAAP EBIT | Within margin guardrails |
| 1.50× | $112.6B | 13.9% | 67.4% GAAP EBIT | Within margin guardrails |
| 2.00× | $150.1B | 22.4% | 61.8% GAAP EBIT | Within margin guardrails |
| 3.00× | $225.2B | 35.5% | 56.0% GAAP EBIT | Within margin guardrails |
CAGR uses $66.8B of same-scope FY2026 sales from the published model or its sourced research base, over four fiscal years. “Within margin guardrails” checks numeric limits only, not commercial plausibility. Each line and year must stay at or below 50.0% GAAP EBIT and 100% EBITDA, or our research margin where that is higher; capacity EBIT uses the engine's equipment depreciation. Unsolved margins are not extrapolated.
- Implied discount rate
- —
- All-business FY2030 sales factor
- 1.04×
No discount rate in the search range makes this model equal the price. Model: 7.2% WACC · 7.9% cost of equity.
FY2030 revenue would need to reach $78.1B (model: $75.1B) across the margin and capacity businesses. FY1 stays fixed; the sales change ramps to FY2030 and stays at that factor thereafter.
If only one business changed
Businesses with margin or capacity revenue paths, ordered by value today. Revenue and margin are separate alternatives; these requirements are not added together.
Pharmaceutical
- Revenue alone
- FY2030 revenue would need to reach $69.6B (model: $67.1B).
- Margin alone
FY2030 EBIT margin would need to reach 82.9% (model: 81.5%).
Animal Health
- Revenue alone
- This business alone cannot get there within the search range.
- Margin alone
FY2030 EBIT margin would need to reach 49.5% (model: 36.4%).
Other disclosed revenues
- Revenue alone
- This business alone cannot get there within the search range.
- Margin alone
FY2030 EBIT margin would need to reach 180.9% (model: 51.6%).
Mechanical requirements, not forecasts. The separate sales-only and single-business factors are searched from 0.1× to 6×; an unsolved comparison means this business alone cannot get there within those bounds. Single-business revenue changes apply from FY2 onward; margin changes scale the full EBIT or EBITDA margin path. Mixed groups show revenue-weighted EBIT and EBITDA margins separately. Requirements above 100% are not feasible margins. Joint rows instead search non-negative uniform margin factors only up to the EBIT/EBITDA guardrails; the entire margin path scales, including post-FY2030 convergence. Sales and margins change together only in that table. The rate search runs from the largest terminal growth rate plus 0.5 percentage points to 30% WACC.
The discount rate
- Cost of equity
- 7.87%
- WACC
- 7.21%
- 10-year Treasury · model / spot
- 3.87% · 5.13%
r_f 3.87% (5-year average 10-year Treasury yield 3.87% (spot 5.13% on 2026-10-21)) + β 0.80 after Blume adjustment × 5%, rounded to 0.01% (1bp)
methodology §4.5: market-weighted WACC, not rounded
The model uses the recorded 5-year average Treasury yield. The spot yield is shown for context.
Every input, with its source
Show 27 inputs · reported, guidance and rule-based
| Input | Value | Basis | Why |
|---|---|---|---|
| Revenue FY2026Pharmaceutical | $59.6B | Rule | target (methodology §4.2), growth 2.5% finanzen.net ↗ |
| Revenue FY2030Pharmaceutical | $67.1B | Guidance | target (methodology §4.2), growth 3.0% finanzen.net ↗ |
| EBIT margin FY2030Pharmaceutical | 81.5% | Rule | linear path to 81.5% by FY2030 (§4.3 E2: 2.8281 points = 4pp × clamp((CAGR − 1.5%) / 2%, 0, 1); revenue CAGR 2.9% to FY2030; no cited expansion evidence) merck.com ↗ |
| Maintenance capexPharmaceutical | 6.3% | Reported | All FY2025 company capex 4.112B / consolidated sales 65.011B, allocated across the revenue lines. merck.com ↗ |
| Terminal growthPharmaceutical | 2.0% | Rule | methodology §4.2 terminal growth for a mature line Valuation methodology §4.2 · Read methodology ↗ |
| Revenue FY2026Animal Health | $6.9B | Reported | target (methodology §4.2), growth 8.0% finanzen.net ↗ |
| Revenue FY2030Animal Health | $7.3B | Guidance | target (methodology §4.2), growth 1.7% finanzen.net ↗ |
| EBIT margin FY2030Animal Health | 36.4% | Rule | linear path to 36.4% by FY2030 (§4.3 E2: 2.8281 points = 4pp × clamp((CAGR − 1.5%) / 2%, 0, 1); revenue CAGR 2.9% to FY2030; no cited expansion evidence) merck.com ↗ |
| Maintenance capexAnimal Health | 6.3% | Reported | All FY2025 company capex 4.112B / consolidated sales 65.011B, allocated across the revenue lines. merck.com ↗ |
| Terminal growthAnimal Health | 2.0% | Rule | methodology §4.2 terminal growth for a mature line Valuation methodology §4.2 · Read methodology ↗ |
| Revenue FY2026Other disclosed revenues | $0.3B | Reported | target (methodology §4.2), growth -34.5% finanzen.net ↗ |
| Revenue FY2030Other disclosed revenues | $0.6B | Guidance | target (methodology §4.2), growth 15.2% finanzen.net ↗ |
| EBIT margin FY2030Other disclosed revenues | 51.6% | Rule | linear path to 51.6% by FY2030 (§4.3 E2: 2.8281 points = 4pp × clamp((CAGR − 1.5%) / 2%, 0, 1); revenue CAGR 2.9% to FY2030; no cited expansion evidence) merck.com ↗ |
| Maintenance capexOther disclosed revenues | 6.3% | Reported | All FY2025 company capex 4.112B / consolidated sales 65.011B, allocated across the revenue lines. merck.com ↗ |
| Terminal growthOther disclosed revenues | 2.0% | Rule | methodology §4.2 terminal growth for a mature line Valuation methodology §4.2 · Read methodology ↗ |
| Share of revenue FY2026Company costs | 31.5% | Rule | company costs outside segment profit, cash only: Rule 17: segment reconciliation mixes R&D14.987B, restructuring 0.889B, other unallocated 4.628B with noncash D&A and financing. Retain these 20.504B cash-cost proxy at company level; exclude financing, depreciation 2.758B and amortization 2.793B. Other unallocated contains mixed items not fully separable: conservative inclusion, not a proven pure cash subtotal.; grows with the lines' revenue merck.com ↗ |
| WACCDiscount rates | 7.21% | Rule | methodology §4.5: market-weighted WACC, not rounded FRED DGS10 2021-10-20..2026-10-21 |
| Cost of equityDiscount rates | 7.87% | Rule | r_f 3.87% (5-year average 10-year Treasury yield 3.87% (spot 5.13% on 2026-10-21)) + β 0.80 after Blume adjustment × 5%, rounded to 0.01% (1bp) 60 monthly returns vs SPY, 2021-09..2026-09 (adjusted closes) |
| Tax rateDiscount rates | 35.5% | Guidance | ExactFY2026 non-GAAP effective-tax guide 35-36% midpoint 35.5%, including non-deductible 9.0B Cidara/5.7B Terns. Preserve short-term proxy without 35% clipping; not GAAP cash tax or a permanent rate. merck.com ↗ |
| Tax normalization yearDiscount rates | FY2028 | Rule | Analyst normalization: FY2026 35.5%, FY2027 24.4%, FY2028 onward 13.3%. One-time 2026 nondeductible acquisitions do not establish perpetual tax.2028 is not management guidance. merck.com ↗ · merck.com ↗ |
| Normalized long-term tax rateDiscount rates | 13.3% | Rule | FY2025 reported GAAP effective tax 13.3% (tax note), positive-earnings anchor after temporary acquisitions. Future use on recurring EBIT is a normalization assumption, not promised guidance; retain modeled GAAP costs and SBC. No acquired-IPR&D cash addback or market-price fit. merck.com ↗ |
| Cash and short-term investmentsBalance sheet | $7.1B | Reported | cash, cash equivalents and short-term investments us-gaap:CashAndCashEquivalentsAtCarryingValue + us-gaap:MarketableSecuritiesCurrent · 0000310158-26-000212 (filed 2026-08-07) |
| BorrowingsBalance sheet | $53.9B | Reported | borrowings due within a year plus long-term borrowings us-gaap:DebtCurrent · 0000310158-26-000212 + us-gaap:LongTermDebtNoncurrent · 0000310158-26-000212 |
| Finance leasesBalance sheet | $0.0B | Reported | no finance lease liability reported balance sheet 2026-06-30 |
| Minority interestsBalance sheet | $51M | Reported | noncontrolling interests at book value us-gaap:MinorityInterest · 0000310158-26-000212 (filed 2026-08-07) |
| SharesBalance sheet | 2.467B | Reported | shares outstanding as of 2026-07-31 cover page of 10-Q 0000310158-26-000212 |
| Dividends per yearShareholders | $8.4B | Reported | Four paid quarterly dividends Jan 8,Apr 7,Jul 8,Oct 7 2026 at 0.85 each=3.40. Annual 2025 declared 3.28 is not current last-four-quarter cash payments. × 2.467B shares merck.com ↗ |
Research notes
- share-count comparison: 2.47B quarter 2026-04-01..2026-06-30 · 0000310158-26-000212; point-in-time denominator retained
- unallocated company costs: $20.5B a year (31.5% of trailing revenue), growing with the lines, valued as one negative business
- cost of equity 7.87% (β 0.80 after Blume adjustment), WACC 7.2%
- Pharmaceutical: FY2030 margin set to 81.5% instead of 82.7% (§4.3 E2: 2.8281 points = 4pp × clamp((CAGR − 1.5%) / 2%, 0, 1); revenue CAGR 2.9% to FY2030; no cited expansion evidence)
- Animal Health: FY2030 margin set to 36.4% instead of 37.5% (§4.3 E2: 2.8281 points = 4pp × clamp((CAGR − 1.5%) / 2%, 0, 1); revenue CAGR 2.9% to FY2030; no cited expansion evidence)
- Other disclosed revenues: FY2030 margin set to 51.6% instead of 52.7% (§4.3 E2: 2.8281 points = 4pp × clamp((CAGR − 1.5%) / 2%, 0, 1); revenue CAGR 2.9% to FY2030; no cited expansion evidence)
Signal Ledger research built from cited consensus, company plans and peer economics because management sets no usable targets — not a forecast and not investment advice. The research desk (GPT-6.1 (Codex)) gathers filings, guidance and targets; deterministic code applies the samepublished rules to every company and checks the result. Inputs may contain errors; follow the source links before relying on them. Read our valuation methodology →