Merck & Co., Inc. (NYSE:MRK) and Pfizer (NYSE:PFE) are both large-cap medical companies, but which is the better business? We will contrast the two companies based on the strength of their dividends, valuation, analyst recommendations, institutional ownership, risk, profitability and earnings.
Institutional and Insider Ownership
72.9% of Merck & Co., Inc. shares are held by institutional investors. Comparatively, 67.4% of Pfizer shares are held by institutional investors. 0.3% of Merck & Co., Inc. shares are held by company insiders. Comparatively, 0.1% of Pfizer shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.
Volatility and Risk
Merck & Co., Inc. has a beta of 0.43, indicating that its stock price is 57% less volatile than the S&P 500. Comparatively, Pfizer has a beta of 0.7, indicating that its stock price is 30% less volatile than the S&P 500.
Profitability
This table compares Merck & Co., Inc. and Pfizer's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
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Merck & Co., Inc. | 24.33% | 53.83% | 16.83% |
Pfizer | 17.85% | 24.88% | 9.32% |
Dividends
Merck & Co., Inc. pays an annual dividend of $2.60 per share and has a dividend yield of 3.2%. Pfizer pays an annual dividend of $1.52 per share and has a dividend yield of 4.2%. Merck & Co., Inc. pays out 50.1% of its earnings in the form of a dividend. Pfizer pays out 51.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Merck & Co., Inc. has increased its dividend for 1 consecutive years and Pfizer has increased its dividend for 1 consecutive years.
Valuation & Earnings
This table compares Merck & Co., Inc. and Pfizer's gross revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
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Merck & Co., Inc. | $46.84 billion | 4.37 | $9.84 billion | $5.19 | 15.60 |
Pfizer | $51.75 billion | 3.93 | $16.27 billion | $2.95 | 12.39 |
Pfizer has higher revenue and earnings than Merck & Co., Inc.. Pfizer 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.
Analyst Ratings
This is a summary of current ratings for Merck & Co., Inc. and Pfizer, as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
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Merck & Co., Inc. | 0 | 2 | 12 | 0 | 2.86 |
Pfizer | 0 | 10 | 4 | 0 | 2.29 |
Merck & Co., Inc. currently has a consensus price target of $95.3571, indicating a potential upside of 17.75%. Pfizer has a consensus price target of $40.0714, indicating a potential upside of 9.63%. Given Merck & Co., Inc.'s stronger consensus rating and higher possible upside, equities analysts plainly believe Merck & Co., Inc. is more favorable than Pfizer.
Summary
Merck & Co., Inc. beats Pfizer on 11 of the 16 factors compared between the two stocks.