GlaxoSmithKline (NYSE:GSK) and Merck & Co., Inc. (NYSE:MRK) are both large-cap medical companies, but which is the superior investment? We will compare the two businesses based on the strength of their analyst recommendations, earnings, institutional ownership, dividends, profitability, risk and valuation.
Insider and Institutional Ownership
11.8% of GlaxoSmithKline shares are owned by institutional investors. Comparatively, 72.9% of Merck & Co., Inc. shares are owned by institutional investors. 10.0% of GlaxoSmithKline shares are owned by insiders. Comparatively, 0.3% of Merck & Co., Inc. shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.
Risk and Volatility
GlaxoSmithKline has a beta of 0.67, suggesting that its stock price is 33% less volatile than the S&P 500. Comparatively, Merck & Co., Inc. has a beta of 0.43, suggesting that its stock price is 57% less volatile than the S&P 500.
Earnings and Valuation
This table compares GlaxoSmithKline and Merck & Co., Inc.'s revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
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GlaxoSmithKline | $43.10 billion | 2.26 | $5.93 billion | $3.17 | 11.41 |
Merck & Co., Inc. | $46.84 billion | 4.12 | $9.84 billion | $5.19 | 14.71 |
Merck & Co., Inc. has higher revenue and earnings than GlaxoSmithKline. GlaxoSmithKline is trading at a lower price-to-earnings ratio than Merck & Co., Inc., indicating that it is currently the more affordable of the two stocks.
Dividends
GlaxoSmithKline pays an annual dividend of $2.52 per share and has a dividend yield of 7.0%. Merck & Co., Inc. pays an annual dividend of $2.60 per share and has a dividend yield of 3.4%. GlaxoSmithKline pays out 79.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Merck & Co., Inc. pays out 50.1% of its earnings in the form of a dividend. GlaxoSmithKline has raised its dividend for 1 consecutive years and Merck & Co., Inc. has raised its dividend for 1 consecutive years.
Analyst Ratings
This is a summary of current recommendations for GlaxoSmithKline and Merck & Co., Inc., as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
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GlaxoSmithKline | 3 | 4 | 6 | 0 | 2.23 |
Merck & Co., Inc. | 0 | 2 | 11 | 0 | 2.85 |
Merck & Co., Inc. has a consensus target price of $96.2727, indicating a potential upside of 26.06%. Given Merck & Co., Inc.'s stronger consensus rating and higher possible upside, analysts clearly believe Merck & Co., Inc. is more favorable than GlaxoSmithKline.
Profitability
This table compares GlaxoSmithKline and Merck & Co., Inc.'s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
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GlaxoSmithKline | 18.50% | 29.60% | 7.11% |
Merck & Co., Inc. | 24.33% | 53.83% | 16.83% |
Summary
Merck & Co., Inc. beats GlaxoSmithKline on 13 of the 16 factors compared between the two stocks.