Merck & Co.

Methodology

Merck's earnings visibility centers on Keytruda's oncology dominance, though the blockbuster drug's eventual patent expiration creates uncertainty about sustainable long-term earnings power. Pipeline success in oncology and vaccines provides growth visibility near-term. Evaluate earnings sustainability beyond Keytruda's patent life when assessing fair value rather than extrapolating current profitability.

Methodology

Merck typically trades at moderate PEG ratios reflecting solid near-term growth from Keytruda offset by concerns about pipeline replacement of the megablockbuster. The metric should account for patent timelines and pipeline probability-adjusted potential. Compare to large-cap pharma peers while considering both current franchise strength and post-patent earnings power.

Methodology

Merck offers a meaningful dividend with steady growth supported by strong current cash flows from Keytruda and established products. The dividend adds significant value to total returns for this pharmaceutical leader. PEGY better reflects income-focused investors' interest in combining current yield with growth from the oncology franchise and pipeline progress.