We attempt to qualitatively evaluate the risks and potential rewards inherent in each stock, with "safer" companies naturally requiring less upside than those with more leveraged balance sheets, inconsistent earnings, lack of product breadth or weaker competitive positions.
No doubt, it is hardly an exact science, but a higher-quality, less-volatile, household-name like pharmaceutical giant Merck (MRK) is a more attractive investment today by our way of thinking than say Mylan Labs (MYL), the long-time generic drug maker whose foray into the branded-drug world with EpiPen has proved to be a public-relations nightmare.
Our Target Price for MRK now stands at $72, while we think MYL by the numbers could be worth as much as $70. Obviously, there is far more upside potential from current prices in MYL, but there is also significantly more risk, while it pays no dividend, compared to the 2.9% yield offered by MRK.
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