Buffett Brain · Research note
Score updated 22 Oct 2026 · analysis from 1 Jun 2026
MRK· Healthcare
Merck &
Merck is a wonderful drug business at a price that asks far too much, with a 33 P/E swallowing every dollar of value.
Buffett fit
Partial fit
Owner
68
Durability
57
Management
64
Price
30
Score updated 22 Oct 2026 · analysis from 1 Jun 2026
Buffett's checklist
Each number against Buffett's bar, and where it ranks among Healthcare stocks in our database.
How much profit the business makes on each dollar invested in it. Higher is better.
What is left of each sale after the cost of making the product. A high number often means pricing power.
The cash the business earns for its owners, compared with the price of the whole company.
How fast sales grew each year over the last five years.
How many years of today's profit you pay for at today's price. Lower means cheaper.
How much the company owes compared with what it owns outright. Lower is safer.
The four pillars
How the business measures up on each of Buffett's four tests.
An owner asks what the whole business earns for him, and right now it earns about 3.0% on the price, the earnings yield, with closer to 4.17%.
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Patents are a with an expiration date stamped on them, and that is the whole worry.
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Management has run the place sensibly. The share count has shrunk about 0.28% a year, at 1.07 is manageable, and interest is covered better than 17 times over.
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There is no here, and an owner must say so plainly. A 33 and a 4.17% owner-earnings yield mean you are paying a rich price for a business whose best products are on the clock.
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For and against
The strongest points on each side, with the numbers behind them.
In its favor
7- 1 of 75.9% shows real on patented drugs
- 2 of 27.6% turns sales into heavy profit
- 3Return on capital of 13.3% on a trailing basis, with a five-year figure near 15.0%
- 4Earnings per share have compounded at 9.1% while revenue grew 7.5%
Concerns
7- 1The price is the problem: a 33 and a 4.17% owner-earnings yield leave no , hence the valuation score of 30
- 2Earnings yield of just 3.0% is a thin return for buying the whole business
- 3 is only 67.7% of net income, so reported profit overstates the cash kept
- 4Patent cliffs threaten the biggest sellers, and the durability score of 57 reflects that
Price history
$150+84.7%· 5-year return
Weekly closing prices. Touch or hover the line for a date.
The business
How the business works
Merck sells patent-protected prescription drugs and vaccines, led by its oncology franchise, and the economics are superb: a 75.9% and a 27.6% show real while the patents hold. Revenue has compounded at 7.5% and earnings per share at 9.1%, so the underlying engine is healthy. The trouble is not the business, it is what you pay to own it.
How this analysis has moved
The call has held across 5 reviews.
Sep 27, 2026 → Oct 22, 2026
What other investors would say
The same company, judged by three other documented playbooks.
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