Is Merck a Good Investment?

OVERVIEW

Merck and Company is a company based in the United States. The company designs, manufactures, and distributes pharmaceutical products and drugs around the world. The company manufactures medicine and drugs that are used to treat cardiovascular, respiratory, HIV, some types of cancer, and many others. The company was founded in 1891.

Why You Should?

  1. Merck is a great reopening play in an investor’s portfolio. The company saw a drop in demand for some of its drugs as people did not regularly visit their doctors. The company also focused on developing drugs for the pandemic. However, once the pandemic is over, the company will report strong growth once again.
  2. The COVID-19 pandemic has also helped the company improve its processes to create new drugs as it is in the process of launching its COVID-19 pill. This pill will help healthcare workers treat COVID patients and might also help us fight pandemics and new diseases in the future. This will benefit the company’s long-term growth and investors.
  3. Merck offers its investors a great dividend, something that it continues to grow year over year. At the moment, the company offers a yearly dividend of 3.46% (or $2.60). This high dividend has helped the company gain and retain investors in the past and will help the company’s stock price growth in the future.
  4. Merck has a solid pipeline of future drugs. The company plans to develop and distribute cancer treatments, various vaccines, and other treatments. As the company continues to grow in these promising fields, it makes the company a great long-term investment and will also benefit investors in the company.
  5. Merck is a safe value investment due to the essential nature of the products that it sells. In addition to this, the company currently trades at a low price-to-earnings ratio (around 35 times). This will help the company avoid volatility in the general market. A strong and growing dividend further solidifies the company’s position as a safe investment option as well.

Why You Should Not?

  1. The company faces tough competition in the pharmaceutical industry. Some of these companies include Regeneron, Johnson & Johnson, Pfizer, Abbvie, and many others. This competition might hurt the company and its investors in the future.
  2. The company faces a negative political environment. Under a Biden administration, legislation to reduce drug prices might be passed, something that will hurt the company’s top and bottom line. This will also hurt investors in the company as the stock price would fall on this news.

MY OPINION

I think that Merck is a good long-term investment due to its position as a good reopening play, positive impacts from the pandemic, a good dividend, a strong pipeline of drugs, as well as its position as a safe value investment option. However, tough competition and a negative political environment might hurt the company and its investors in the future.

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Aaditya Patel

Aaditya Patel

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.