Merck's gross profit margin for the second quarter of its fiscal year 2012 is essentially unchanged when compared to the same period a year ago. Even though sales increased, the net income has decreased. Merck has strong liquidity. Currently, the Quick Ratio is 1.51 which shows the ability to cover short-term cash needs. The company's liquidity has increased from the same period last year, indicating improving cash flow.
During the same period, stockholders' equity ("net worth") has remained unchanged from the same quarter last year. The key liquidity measurements indicate that the company is unlikely to face financial difficulties in the near future.
The current P/E ratio indicates a discount compared to an average of 21.78 for the Pharmaceuticals industry and a premium compared to the S&P 500 average of 16.49. To use another comparison, its price-to-book ratio of 2.46 indicates valuation on par with the S&P 500 average of 2.28 and a significant discount versus the industry average of 5.54. The price-to-sales ratio is well above the S&P 500 average, but well below the industry average. Upon assessment of these and other key valuation criteria, Merck proves to trade at a discount to investment alternatives within the industry.