Merck & (NYSE: MRK) and Teva Pharmaceutical Industries Limited (NYSE:TEVA) are both large-cap medical companies, but which is the better investment? We will compare the two companies based on the strength of their profitability, dividends, analyst recommendations, risk, institutional ownership, earnings and valuation.

Insider and Institutional Ownership

72.9% of Merck & shares are held by institutional investors. Comparatively, 56.8% of Teva Pharmaceutical Industries Limited shares are held by institutional investors. 0.1% of Merck & shares are held by company insiders. Comparatively, 7.1% of Teva Pharmaceutical Industries Limited shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Earnings and Valuation

This table compares Merck & and Teva Pharmaceutical Industries Limited’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Merck & $40.02 billion 4.36 $15.45 billion $2.47 25.92
Teva Pharmaceutical Industries Limited $23.37 billion 0.77 $7.42 billion ($6.12) -2.88

Merck & has higher revenue and earnings than Teva Pharmaceutical Industries Limited. Teva Pharmaceutical Industries Limited is trading at a lower price-to-earnings ratio than Merck &, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Merck & and Teva Pharmaceutical Industries Limited’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Merck & 17.14% 26.02% 11.15%
Teva Pharmaceutical Industries Limited -25.18% 15.96% 5.31%

Dividends

Merck & pays an annual dividend of $1.88 per share and has a dividend yield of 2.9%. Teva Pharmaceutical Industries Limited pays an annual dividend of $0.94 per share and has a dividend yield of 5.3%. Merck & pays out 76.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Teva Pharmaceutical Industries Limited pays out -15.4% of its earnings in the form of a dividend. Teva Pharmaceutical Industries Limited has increased its dividend for 5 consecutive years. Teva Pharmaceutical Industries Limited is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk and Volatility

Merck & has a beta of 0.81, suggesting that its stock price is 19% less volatile than the S&P 500. Comparatively, Teva Pharmaceutical Industries Limited has a beta of 0.57, suggesting that its stock price is 43% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Merck & and Teva Pharmaceutical Industries Limited, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Merck & 1 7 10 0 2.50
Teva Pharmaceutical Industries Limited 3 17 6 0 2.12

Merck & presently has a consensus target price of $69.64, indicating a potential upside of 8.77%. Teva Pharmaceutical Industries Limited has a consensus target price of $31.24, indicating a potential upside of 77.48%. Given Teva Pharmaceutical Industries Limited’s higher probable upside, analysts plainly believe Teva Pharmaceutical Industries Limited is more favorable than Merck &.

Summary

Merck & beats Teva Pharmaceutical Industries Limited on 12 of the 17 factors compared between the two stocks.

About Merck &

Merck & Co., Inc. is a global healthcare company. The Company offers health solutions through its prescription medicines, vaccines, biologic therapies and animal health products. It operates through four segments: Pharmaceutical, Animal Health, Healthcare Services and Alliances. The Company’s Pharmaceutical segment includes human health pharmaceutical and vaccine products marketed either directly by the Company or through joint ventures. Human health pharmaceutical products consist of therapeutic and preventive agents, generally sold by prescription, for the treatment of human disorders. The Company sells its human health pharmaceutical products primarily to drug wholesalers and retailers, hospitals, government agencies and managed healthcare providers, such as health maintenance organizations, pharmacy benefit managers and other institutions. Vaccine products consist of preventive pediatric, adolescent and adult vaccines, primarily administered at physician offices.

About Teva Pharmaceutical Industries Limited

Teva Pharmaceutical Industries Limited is a pharmaceutical company. The Company is engaged in developing, producing and marketing generic medicines and a portfolio of specialty medicines. The Company operates through two segments: Generic medicines and Specialty medicines. The Company develops, manufactures and sells generic medicines in a range of dosage forms, including tablets, capsules, injectables, inhalants, liquids, ointments and creams. Its specialty medicines business focuses on delivering a range of solutions to patients and providers through medicines, devices and services in various regions and markets around the world. Its specialty medicines business includes its core therapeutic areas of central nervous system (CNS) and respiratory medicines with a focus on asthma and chronic obstructive pulmonary disease. It also has specialty products in oncology, women’s health and selected other areas.

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