Macroaxis Stories

Should we be acquiring Merck or Royal Bank?

July 2, 2024  By Rifka Kats
Macroaxis Story
In the comparison between Merck and Royal Bank, the latter emerges as a potentially more lucrative investment opportunity. Royal Bank, a key player in the Banks - Diversified industry, boasts an impressive net asset value of $2 trillion. The bank has consistently shown strong financial health, with a profit margin of 28.38% and EBITDA of $21.33 billion. The operating margin, albeit at a low 0.40%, is backed by a robust net interest income of $25.1 billion. The bank's shares are significantly owned by institutions, accounting for 51.89% of the outstanding 1.42 billion shares. Over the past five years, the bank has generated a return of 3.82%, indicating a stable performance. Despite the 52-week low of $76.32, the bank has rebounded to a 52-week high of $109.51. The bank's price to book ratio stands at 1.76X, with a price to sales ratio of 2.62X. Furthermore, the quarterly revenue growth rate is 11.7%, and the bank reported a gross profit of $48.5 billion. The bank's yield is 0.04%, making it a potential choice for income-focused investors. With the fiscal year ending in October, investors can look forward to the bank's income before tax, which was reported at $18.5 billion in the previous year. Many prudent traders are steering clear of the banking sector, making it worthwhile to delve deeper into Royal Bank's position compared to Merck and similar entities. We will examine the competitive dynamics between Royal Bank and Merck.
Published over three months ago
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Reviewed by Raphi Shpitalnik

With a robust profit margin of 28.38% and a significant net income of $14.9B, Royal Bank presents a compelling investment opportunity. Additionally, the bank's substantial total assets of $2T and a healthy return on equity of 13% further solidify its position as a potentially lucrative investment choice.

Key Arguments

By comparing fundamental indicators between Royal Bank and Merck, we can examine the impact of market volatility on both companies' prices and assess if they can mitigate market risk when combined in a portfolio. Pair trading strategies can also be employed, such as matching a long position in Merck with a short position in Royal Bank. For more details, refer to our pair correlation module. Let's start with asset analysis. Asset utilization typically refers to the revenue generated for each dollar of assets reported by a company. The current return on assets for Royal Bank suggests inefficient asset usage in July.
Investment perspective, in general, refers to a viewpoint or opinion regarding investment opportunity in Royal Bank. It encompasses the assessment of an investment's potential risks and rewards, and expectations for its performance over time. Several factors influence the investment perspective on Royal Bank, including investment goals, risk tolerance, time horizon, market conditions, and research and analysis. Investors have varying goals, such as capital preservation, income generation, or long-term growth. Risk tolerance plays a significant role in shaping an investor's perspective, with some being more risk-averse and others willing to take on higher risks for potential returns.

How important is Royal Bank's Liquidity

Royal Bank financial leverage refers to using borrowed capital as a funding source to finance Royal Bank of ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Royal Bank financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Royal Bank's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Royal Bank's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Royal Bank's total debt and its cash.

What do experts say?

Stock analysis is a method for investors and traders to make buying and selling decisions. By studying and evaluating past and current data, investors and traders attempt to gain an edge in the markets by making informed decisions. It is good to see analyst projects for Royal Bank, but it might be worth checking our own buy vs. sell analysis

Royal Bank Gross Profit

Royal Bank Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing Royal Bank previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show Royal Bank Gross Profit growth over the last 10 years. Please check Royal Bank's gross profit and other fundamental indicators for more details.

Details

Revenue is income that a firm generates from business activities such us rendering services or selling goods to customers. It is a crucial part of a business and an essential item when evaluating a company's financial statements. Revenues from a firm's primary business operations can be reported on the income statement as sales revenue, net sales, or simply sales, depending on the industry in which a given company operates.
Revenue is typically recorded when cash or cash equivalents are exchanged for services or goods and can include products or services discounts, promotions, as well as early payments on invoices or services rendered in advance.

Revenue Breakdown

Now, let's check Royal Bank revenue. Based on the latest financial disclosure, Royal Bank of reported 56.26 B of revenue.
This is much higher than that of the Banks sector and significantly higher than that of the Financials industry. The revenue for all United States stocks is significantly lower than that of Royal Bank. As for Merck we see revenue of 59.87 B, which is much higher than that of the Financials
Royal56.26 Billion
Sector0.0
Merck59.87 Billion
56.3 B
Royal
Sector
59.9 B
Merck
"Buy low, sell high," is an adage that perfectly fits the current scenario for Royal Bank. The company has shown a commendable five-year return of 3.82%, while maintaining a Beta of 0.84, suggesting less volatility compared to the market. With a market capitalization of $150.73B, and a robust Net Asset position of $2T, Royal Bank's financial health is undeniably strong. Moreover, the Price to Earnings ratio is at a comfortable 12.27X, implying reasonable pricing for the earnings potential. Considering these factors, compared to Merck, Royal Bank presents a more lucrative investment opportunity..

Will Royal continue to rise?

The Royal Bank's coefficient of variation currently stands at a high 1107.2, indicating significant volatility in its stock price. This could be a risk-reward scenario for investors. While it suggests potential for high returns if the stock continues to rise, it also implies a risk of substantial losses if the stock underperforms. Given the current market conditions and the bank's strong financial health, there's a good chance that Royal Bank's stock will continue its upward trend. However, investors should be ready for potential fluctuations and monitor the stock's performance closely. The Royal Bank's low volatility is indicated by a Treynor Ratio of 0.13, Maximum Drawdown of 6.54, and kurtosis of 5.91. Understanding market volatility trends can help investors time the market.
Using volatility indicators properly allows traders to measure Royal Bank's stock risk against market volatility during both bullish and bearish trends. High volatility in bear markets can impact Royal Bank's stock price and stress investors as they see their shares' value decrease, often leading them to rebalance their portfolios by purchasing different financial instruments.In conclusion, the Royal Bank (USA Stocks: RY) presents an intriguing investment opportunity. With an analyst target price estimated value of $98.41 and a valuation real value of $110.36, there's a potential upside. The analyst overall consensus leans towards a 'Buy', backed by 6 strong buys, 5 buys, and only 1 sell. Despite the possible downside price of $107.46, the valuation market value stands at $107.52, suggesting stability. However, investors should always consider potential risks alongside these promising indicators. The fiscal year-end in October could bring unforeseen market fluctuations. Overall, while there may be slight uncertainties, the Royal Bank holds strong potential for investors..

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Editorial Staff

Rifka Kats is a Member of Macroaxis Editorial Board. Rifka writes about retail product and service companies from the perspective of a regular consumer and sophisticated investor at the same time. She is passionate about corporate ethics and equality in the workforce. View Profile
This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Rifka Kats do not own shares of Royal Bank of. Please refer to our Terms of Use for any information regarding our disclosure principles.

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