We think that Bristol Myers Squibb Action (NYSE: BMY) is currently a better choice compared to its industry counterpart, Merck share (NYSE: MRK), given its better growth outlook and comparatively lower valuation, its shares are trading at 3.0x earnings, compared to 3.6x MRK stock. However, this valuation difference is also justified given the better profitability of Merck. However, looking at the outlook for the future, we believe Bristol Myers Squibb will outperform Merck, as we discuss in the sections below. We compare a multitude of factors such as historical revenue growth, returns and valuation multiple in an interactive dashboard analysis Merck vs. Bristol Myers Squibb: Which action is a better bet? Parts of the analysis are summarized below.
1. Bristol Myers Squibb’s revenue growth is stronger
- Merck’s sales have grown from $ 39.8 billion in 2016 to $ 54.1 billion in the past twelve months, while Bristol Myers Squibb’s revenue has grown from $ 19.4 billion to $ 45.5 billion. billion dollars over the same period, mainly reflecting the impact of its Celgene
acquired in 2019.
- However, Merck’s revenue growth of 22% over the past twelve months has been higher than Bristol Myers Squibb’s 15% growth, given Keytruda’s continued sales growth with the expansion of its labels. and a rebound in demand for vaccines, including Gardasil, after a drop in 2020, due to the impact of the pandemic.
- Over a slightly longer period, both companies saw their sales increase. That said, Bristol Myers Squibb’s 29% three-year revenue CAGR, helped by the Celgene acquisition, compares to a 6% CAGR for Merck.
- Looking ahead, with economies opening up, demand for pharmaceuticals is expected to remain high in the near term, bodes well for revenue growth for both companies. Our Merck Income and Bristol Myers Squibb turnover Dashboards provide more information on business income.
- Bristol Myers Squibb’s revenue is expected to grow faster than Merck’s. The table below summarizes our revenue forecast for MRK and BMY over the next three years and shows a 9.5% CAGR for Bristol Myers Squibb, compared to a 5.1% CAGR for Merck.
- Note that we have different methodologies for companies negatively impacted by Covid, and for companies not impacted or positively impacted by Covid while forecasting future revenues. For businesses negatively impacted by Covid, we consider the quarterly revenue recovery trajectory to forecast recovery at the pre-Covid revenue execution rate, and beyond the recovery point, we apply the observed average annual growth to during the three years preceding Covid to simulate the return to normal conditions. For companies with positive revenue growth during Covid, we consider the average annual growth before Covid with some weight for growth during Covid and the past twelve months.
2. Merck is also more profitable and has a better debt position.
- Merck’s operating margin of 18% over the past twelve months is much better than -16% for Bristol Myers Squibb.
- Additionally, if we look at recent growth in margins, both companies have experienced negative growth, with the last twelve months margin variation compared to the last three years of -2.6% for Merck, compared to a large variation. -23.6% for Bristol Myers. Squib.
- Note that Bristol Myers Squibb’s margins over the past twelve months have been negatively impacted due to a one-time ongoing R&D charge of $ 11.4 billion resulting from its acquisition of MyoKardia. Bristol Myers Squibb’s operating margin figure stood at 19% for the nine-month period ending September 2021, still below around 25% for Merck.
- Regarding financial risk, Merck’s 14% debt as a percentage of equity is less than 32% for Bristol Myers Squibb, while Bristol Myers Squibb’s 14% cash as a percentage of assets is above 11% of Merck, which implies that MRK has a better debt position, but BMY stock has a better cash position.
3. The net of everything
- We see that revenue growth over the past few quarters has been stronger for Merck and more profitable than Bristol Myers Squibb. That said, BMY has a better cash position and is trading at a comparatively lower valuation.
- Bristol Myers Squibb recently announced a 10% increase in its quarterly dividend and increased its share buyback program by $ 15 billion, implying better than expected earnings growth over the coming years.
- Now, looking at the outlook for the future, using P / S as a basis, due to the high fluctuations in P / E and P / EBIT, we believe BMY is the better choice of the two. The table below summarizes our revenue and performance expectations for MRK and BMY over the next three years, and shows an expected return of 30% for BMY during this period compared to 24% for MRK, which implies that both stocks are likely to offer good returns in the future. But if one has to choose between the two, investors would be better off buying BMY rather than MRK, in our opinion. Our dashboard Merck vs. Bristol Myers Squibb has more details on how we arrive at these numbers.
- Note that Covid-19 is proving more difficult to contain than initially thought, due to the spread of more contagious virus variants and infections in many geographic areas, including the United States and Europe. , are higher than they were a few months ago. Concerns over Omicron have scared the markets as a whole. If this recent significant spike in Covid-19 cases of the new variant we are currently seeing results in a disruption in healthcare, it is likely to have an impact on sales growth for Merck and Bristol Myers Squibb.
While MRK and BMY shares may experience higher levels, the Covid-19 crisis has created many price discontinuities which may provide attractive trading opportunities. For example, you will be surprised at how counterintuitive stock valuation is for Xylem vs. Merck.
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