Novo Nordisk A/S (NYSE: NVO) and Merck & (NYSE:MRK) are both large-cap medical companies, but which is the better business? We will contrast the two businesses based on the strength of their analyst recommendations, dividends, profitability, risk, earnings, valuation and institutional ownership.

Risk & Volatility

Novo Nordisk A/S has a beta of 0.6, indicating that its stock price is 40% less volatile than the S&P 500. Comparatively, Merck & has a beta of 0.81, indicating that its stock price is 19% less volatile than the S&P 500.

Dividends

Novo Nordisk A/S pays an annual dividend of $0.82 per share and has a dividend yield of 1.7%. Merck & pays an annual dividend of $1.88 per share and has a dividend yield of 2.9%. Novo Nordisk A/S pays out 36.4% of its earnings in the form of a dividend. 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. Novo Nordisk A/S has raised its dividend for 5 consecutive years and Merck & has raised its dividend for 20 consecutive years. Merck & is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Novo Nordisk A/S and Merck &’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Novo Nordisk A/S 33.82% 87.49% 40.72%
Merck & 17.14% 26.02% 11.15%

Valuation and Earnings

This table compares Novo Nordisk A/S and Merck &’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Novo Nordisk A/S $18.36 billion 6.63 $8.65 billion $2.25 21.83
Merck & $40.02 billion 4.48 $15.45 billion $2.47 26.64

Merck & has higher revenue and earnings than Novo Nordisk A/S. Novo Nordisk A/S is trading at a lower price-to-earnings ratio than Merck &, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

6.0% of Novo Nordisk A/S shares are owned by institutional investors. Comparatively, 72.9% of Merck & shares are owned by institutional investors. 0.1% of Merck & shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Analyst Ratings

This is a summary of recent ratings for Novo Nordisk A/S and Merck &, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Novo Nordisk A/S 3 6 0 0 1.67
Merck & 1 7 10 0 2.50

Merck & has a consensus price target of $69.64, suggesting a potential upside of 5.86%. Given Merck &’s stronger consensus rating and higher possible upside, analysts clearly believe Merck & is more favorable than Novo Nordisk A/S.

Summary

Merck & beats Novo Nordisk A/S on 12 of the 17 factors compared between the two stocks.

Novo Nordisk A/S Company Profile

Novo Nordisk A/S is a global healthcare company engaged in diabetes care. The Company is also engaged in the discovery, development, manufacturing and marketing of pharmaceutical products. The Company operates through two business segments: diabetes and obesity care, and biopharmaceuticals. The Company’s diabetes and obesity care segment covers insulin, GLP-1, other protein-related products, such as glucagon, protein-related delivery systems and needles, and oral anti-diabetic drugs. The Company’s biopharmaceuticals segment covers the therapy areas of hemophilia care, growth hormone therapy and hormone replacement therapy. The Company also offers Saxenda product to treat obesity. It offers a range of products, including NovoLog/NovoRapid; NovoLog Mix/NovoMix; Prandin/NovoNorm; NovoSeven; Norditropin, and Vagifem. As of December 31, 2016, it marketed its products in over 180 countries. Its regional structure consists of two commercial units: North America and International Operations.

Merck & Company Profile

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.

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