5
Amgen Inc. (AMGN)
- Equity
- US
- Healthcare
RISK
RETURN
Key risk factors
Negligible price volatility
Strong trading liquidity
Strong & resilient to price shocks
Key return factors
Solid dividends
Strong margins and returns
Overvalued vs peers
Company profileAmgen Inc. discovers, develops, manufactures, and delivers human therapeutics worldwide. It focuses on inflammation, oncology/hematology, bone health, cardiovascular disease, nephrology, and neuroscience areas. The company's products include Enbrel to treat plaque psoriasis, rheumatoid arthritis, and psoriatic arthritis; Neulasta that reduces the chance of infection due a low white blood cell count in patients cancer; Prolia to treat postmenopausal women with osteoporosis; Xgeva for skeletal-related events prevention; Otezla for the treatment of adult patients with plaque psoriasis, psoriatic arthritis, and oral ulcers associated with Behçet's disease; Aranesp to treat a lower-than-normal number of red blood cells and anemia; KYPROLIS to treat patients with relapsed or refractory multiple myeloma; and Repatha, which reduces the risks of myocardial infarction, stroke, and coronary revascularization. It also markets Nplate, Vectibix, MVASI, Parsabiv, EPOGEN, KANJINTI, BLINCYTO, Aimovig, EVENITY, AMGEVITATM, Sensipar/Mimpara, NEUPOGEN, IMLYGIC, Corlanor, and AVSOLA. Amgen Inc. serves healthcare providers, including physicians or their clinics, dialysis centers, hospitals, and pharmacies. It distributes its products through pharmaceutical wholesale distributors, as well as direct-to-consumer channels. It has collaboration agreements with Novartis Pharma AG; UCB; Bayer HealthCare LLC; BeiGene, Ltd.; Eli Lilly and Company; Datos Health; and Verastem, Inc. to evaluate VS-6766 in combination with lumakrastm (Sotorasib) in patients with KRAS G12C-mutant non-small cell lung cancer. It has an agreement with Kyowa Kirin Co., Ltd. to jointly develop and commercialize KHK4083, a Phase 3-ready anti-OX40 fully human monoclonal antibody for the treatment of atopic dermatitis and other autoimmune diseases; and research and development collaboration with Neumora Therapeutics, Inc. and Plexium, Inc. Amgen Inc. was incorporated in 1980 and is headquartered in Thousand Oaks, California.
Valuation: Overvalued
Multiple
TTM
NTM
P/E
43.60
39.70
PEG
9.00
-
P/B
32.60
17.90
P/S
5.60
5.00
P/FCF
23.10
17.20
EV/EBITDA
20.90
16.30
Considering past and projected metrics, the stock is 'expensive' compared to its peers. In particular, the stock is overpriced on P/E, 'expensive' on EV/EBITDA, and trading at neutral levels on P/FCF.
Performance: Mixed
The stock's performance has been mixed in the past six months, with growth following a decline. The stock has outperformed its global peers from the same sector and industry (as shown above), surpassing them by 10ppts in total. At the same time, the stock's performance relative to its the peers from the same country and sector is different. The stock outperformed these peers by 2ppts over the past six months and grew 11ppts faster in the past month. With respect to the stock's valuation against its peers, its overall price performance is neutral.
Analyst view: Slightly negative
The average target price is 285 and suggests 7% downside potential. Usually, this means a SELL recommendation among investment firms, or a recommendation to decrease one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 351.0. This translates into 15% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 157.0. This is equivalent to 49% downside potential in the worst case.
Profitability: Strong
RoE
Amgen Inc. reported a return on equity (RoE) of 66.9% in the last 12 months, down from 135.8% in FY23. The market consensus projects an RoE of 141.7% in FY24, again ahead of its peers.
RoA
Another important profitability metric, return on assets (RoA), amounted to 4.0% in the last 12 months, a decrease from 8.3% in FY23. The market analysts predict that RoA will be 4.3% in FY24, again weaker than its peers.
RoCE
In the last 12 months, the return on capital employed (RoCE) declined to 5.0%, below the peers. The consensus estimate for FY24 for RoCE is 7.7%, again behind the peers.
Net margin
EBITDA margin
Historically, AMGN has reported very strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 12.8%, down from 23.8% in FY23. The company has reported strong EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 35.5% in the last 12 months, a decline from 43.0% in FY23.
RoIC / WACC = 1.8(good value creation)
The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.8 in the past several years. This ratio implies a good shareholder value creation. Growth: Poor
Revenue
EBITDA
EPS
Free cash flow
AMGN reported revenue of USD 29 481mn in the last 12 months, up 5% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 44% from FY23 to USD 7.03. Market expects EPS to reach USD 17.98 in FY24.Revenue has been growing very slowly over the past several years (middle negative), while EBITDA growth has been weak. Net income has fallen rapidly in recent years (strongly negative). FCF has fallen rapidly, far faster than EBITDA. On the positive side, revenue dynamics is very stable.
Dividends: Solid
Dividend paid
Dividend yield
The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, and there is an evident trend. In the past 12 months, the dividend yield has been good and slightly above its peers. On average, the company pays dividends quarterly, which may appeal to investors valuing a regular income stream.
Default risk: Considerable
The risk of default is high. Among the negative credit factors, we point to slow historical revenue growth, excessive margin volatility, poor working capital management, weak debt servicing capacity, and an unfavourable capital structure. We note robust profitability and solid return on capital, among the positive credit factors.
Volatility: Negligible
In normal market circumstances, AMGN is not volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will stay within a narrow range. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to negligible.
Stress-test: Negligible
In highly turbulent market conditions, AMGN is not volatile. In other words, the stock will fall far less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be very low.
Selling difficulty: Very low
AMGN boasts very high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually very stable and remains favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions.
Country risk: Very low
The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.
Other risks: Negligible
No other major risks have been identified.