Merck Stock Price Suggests Undervaluation Despite Mixed Valuation Checks

Merck's stock price has more than doubled over the past five years, but valuation checks present a mixed picture. The company's Discounted Cash Flow (DCF) estimate suggests meaningful upside, while market-based multiples look closer to in line.

The DCF model estimates Merck's intrinsic value based on its cash flows and assumes they will continue growing. With last twelve-month free cash flow of about $14.0b, the model points to an estimated intrinsic value of around $228 per share.

Compared with the current share price of $130.20, this represents a 43.0% discount, indicating that Merck stock is undervalued on this measure. The recent update on access plans for alimatravir in HIV prevention supports a robust cash flow outlook.