Last Year’s Top Performer Looks to Repeat

Momentum is on its side [View in browser]( Editor’s Note: It’s Friday. Time to give you a stock pick from our sister newsletter, The Spill, so you can think about it over the weekend and maybe make a move Monday morning. While The Juice helps you be better with money across the board, The Spill focuses on stocks financial pros are researching and judges how good of buys they are. If you’re already sold, you can[sign up for The Spill – for free – here](. Proprietary Data Insights Financial Pros Top Big Pharma Stock Searches in the Last Month Rank Name Searches #1 Pfizer 1,885 #2 Merck & Co. 1,386 #3 Eli Lilly and Company 1,285 #4 Johnson & Johnson 887 #5 Novartis AG 445 #ad [Crypto ATMs Are Popping Up Worldwide]( Brought to you by [InvestingChannel]( [Stay Ahead of the Game: Discover the Top Investment Opportunities for 2023 and Beyond]( Inflation is out of control. The Fed plans to hike rates until we’re all in the poorhouse. And there’s a recession right around the corner… But you don’t have to settle for doom and gloom. In this free exclusive report, we dive into three key investment trends – and our top recommendations to play them to grow your wealth. [Go here to learn where to put your money for 2023 and beyond](. Healthcare Last Year’s Top Performer Looks to Repeat The Dogs of the Dow is a trading strategy where you buy the 10 stocks with the highest dividend yields in the Dow Jones Industrial Average. The strategy outperformed the overall market in 2022, and some believe it will again this year. One of the new Dogs on this year’s list is Merck (MRK), a stock that consistently draws more than 1,000 searches from financial pros each month, according to our Trackstar database. It was the top-performing Dow 30 stock last year and has an impressive portfolio of treatments, with Keytruda leading the pack at $5.4 billion in sales in Q3 2022. Financial pros may also like MRK because of its relatively low valuation, strong cash flow, and vast pipeline. Will MRK continue to outperform? Merck’s Business Merck is a global drug manufacturer that develops and sells a wide range of pharmaceutical products. Some of its top-selling drugs include Keytruda for cancer, the Gardasil HPV vaccine, Januvia for diabetes and obesity, Janumet for diabetes and obesity, and the Varivax varicella (chickenpox) vaccine. [Revenue] Source: Merck It boasts a massive pipeline with 82 programs in phase 2 clinical trials, 30 in phase 3, and three under review with regulatory authorities. The company’s sales consist of pharmaceutical products, vaccines, and animal health products. It segments its business into Human Health and Animal Health. [Q3] Source: Merck Financials [Financials] Source: Stock Analysis Merck’s current ratio (current assets divided by current liabilities; the higher the ratio, the better financial position a company is in) has improved from 1.1x in 2018 to 1.4x over the last 12 months. The company has delivered 12 years of dividend growth and pays investors an annual dividend of $0.73 per share. Merck has a net operating cash flow of $19.7 billion, so it’s easy to see why Wall Street loves this stock. In fact, Wall Street titans like Jim Simons, Ken Griffin, and Ray Dalio have nine-figure positions in MRK. Valuation [Valuation] Source: Seeking Alpha Over the last five years, MRK has averaged a P/E GAAP (price-to-earnings generally accepted accounting principles) ratio of 36.1x. It now trades at 19.0x. That’s middle-of-the-road among its peers. For example, Pfizer (PFE) and Novartis (NVS) are cheaper at 9.8x and 9.4x, and Eli Lilly (LLY) and Johnson & Johnson (JNJ) are noticeably higher at 54.6x and 25.1x. Merck’s price-to-sales ratio of 4.9x is about the same as JNJ. It’s above MRK’s five-year average of 4.3x and higher than PFE at 2.9x and NVS at 3.9x, but below LLY at 11.2x. Some analysts worry Merck’s earnings-per-share growth estimates are slightly below the industry average through 2027. But others believe Keytruda’s optimistic data on treating non-small cell lung cancer is an incredible opportunity to prolong franchise growth beyond the drug’s 2028 exclusivity deadline and drive significant sales for the company. Profitability [Profitability] Source: Seeking Alpha Merck’s Keytruda, Lynparza, Lenvima, and Reblozyl were responsible for nearly 40% of the company’s total revenue, as it continues to be a force in oncology. The company’s net income margin is 25.9%, higher than LLY at 20.6% and JNJ at 20.0%, but lower than PFE at 29.8% and NVS at 41.7%. Growth [Growth] Source: Seeking Alpha Merck’s revenue growth has been outstanding relative to its peers over the last five years. Its five-year average of 8.2% is above LLY at 5.4%, NVS at 1.1%, and JNJ at 5.3%, though PFE has been even more impressive at 13.7%. Keytruda sales growth was up 29.1% from Q3 2021, which significantly boosted Merck’s revenues. Our Opinion 9/10 MRK was one of the top-performing stocks in 2022. Over the last five years, it’s returned 146.8%. Despite share prices rising, the company is relatively cheap compared to its five-year average P/E ratio. It continues to succeed in drug trials and receive new approvals, along with its existing all-star portfolio of treatments. We rate Merck a buy and believe there’s further upside from here. To get content like this daily, sign up for The Spill for free [here](. 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