10 Most Profitable Value Stocks to Buy Now

7. Merck & Co Inc. (NYSE:MRK)

TTM Net Income as of March 13: $17.117 billion

Forward P/E Ratio as of March 13: 10.36

Number of Hedge Fund Holders: 91

Merck & Co Inc. (NYSE:MRK) is a healthcare company that operates across pharmaceutical and animal health sectors. It offers drugs like Keytruda (immunotherapy) and Gardasil (vaccine), alongside veterinary solutions. It focuses on innovation and partnerships to address critical medical needs.

Keytruda’s 2024 sales reached $29.5 billion, which was an 18% year-over-year increase. This was due to its expanding use in various cancer treatments, both in metastatic and earlier stages. The company is innovating administration methods and developing a subcutaneous version. This method involves injecting the medication into the layer of fatty tissue that lies under the skin. Gardasil’s 2024 sales totaled $8.6 billion. This was a 3% decline, which was attributed to the drop in Chinese sales. Specifically, Q4 2024 sales were $1.6 billion, which indicated an 18% decrease. Sales in China were down due to decreased consumer spending, which led to lower-than-expected demand and excess inventory.

On February 10, TD Cowen revised its stance on Merck & Co Inc. (NYSE:MRK) and downgraded the stock from Buy to Hold. The price target was shifted downward from $121 to $100. The firm’s optimism decreased due to the increasing concerns surrounding Gardasil’s sales challenges in China. The firm also pointed out that the company faces Keytruda’s impending loss of exclusivity, which is scheduled for 2028 in the US and 2031 in the European Union.

Oakmark Equity and Income Fund acknowledges Keytruda’s success and strong pipeline. It stated the following regarding Merck & Co Inc. (NYSE:MRK) in its Q3 2024 investor letter:

“Merck & Co., Inc. (NYSE:MRK) is a global pharmaceutical firm with leading oncology, vaccine and animal health franchises. Premier products in Merck’s portfolio include Keytruda, Gardasil, Winrevair and Bravecto. Outsized contributor Keytruda is an immuno-oncology drug that treats several cancers and tumors. Keytruda is an astounding clinical and commercial success that is on track to become one of the best-selling prescription drugs to date. Investor angst surrounding Keytruda’s pending U.S. patent expiration in 2028 presented a chance to buy shares at a discounted valuation. We believe opportunities to extend Keytruda’s duration through life cycle management are underappreciated. More importantly, discounted cash flows from products already on market cover today’s entire stock price, meaning there is minimal value ascribed to a promising pipeline with strong sales potential. We believe Merck is led by a capable management team that looks to reinvest these cash flows in an accretive manner.”