Is Merck & Co., Inc. overvalued or undervalued?

As of 17 October 2025, the valuation grade for Merck & Co., Inc. moved from fair to attractive, indicating a positive shift in its perceived value. The company appears to be undervalued given its P/E ratio of 15, which is lower than the peer average of approximately 26.1 for comparable companies like Johnson & Johnson and Eli Lilly & Co. Additionally, Merck's PEG ratio stands out at 0.03, suggesting strong growth potential relative to its price, while its EV to EBITDA ratio of 11.50 is competitive against peers like Pfizer, which has an EV to EBITDA of 11.07.
In terms of performance, Merck's recent stock returns have lagged behind the S&P 500, with a year-to-date decline of 14.77% compared to the index's gain of 13.30%. This underperformance, coupled with a robust ROE of 40.02% and a dividend yield of 5.70%, reinforces the narrative that Merck is currently undervalued in the market.