What Should You Know About Amgen (AMGN)?

It was a difficult end of the week for Amgen investors, who have watched their shares sink by -1.9% to a price of $218.65 on Friday. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.

A Very Low P/E Ratio but Trades Above Its Graham Number:

Amgen Inc. discovers, develops, manufactures, and delivers human therapeutics worldwide. The company belongs to the Health Care sector, which has an average price to earnings (P/E) ratio of 24.45 and an average price to book (P/B) ratio of 4.16. In contrast, Amgen has a trailing 12 month P/E ratio of 14.7 and a P/B ratio of 21.85.

Amgen's PEG ratio is 13.05, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.

Stable Revenues With Increasing Reinvestment in the Business:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $23,362 $25,424 $25,979 $26,323
Gross Margins 81.4% 75.8% 75.2% 75.7%
Operating Margins 41.4% 36.0% 35.2% 36.3%
Net Margins 33.57% 28.57% 22.68% 24.89%
Net Income (MM) $7,842 $7,264 $5,893 $6,552
Net Interest Expense (MM) -536 -1,006 -1,197 -1,406
Net Interest Expense (MM) -$536 -$1,006 -$1,197 -$1,406
Depreciation & Amort. (MM) -$2,206 -$3,601 -$3,398 -$3,417
Earnings Per Share $12.88 $12.31 $10.28 $14.83
EPS Growth n/a -4.43% -16.49% 44.26%
Diluted Shares (MM) 609 590 573 534
Free Cash Flow (MM) $9,150 $10,497 $9,261 $8,785
Capital Expenditures (MM) -$618 -$608 -$880 -$936
Net Current Assets (MM) -$31,594 -$32,395 -$35,080 -$39,274
Current Ratio 1.44 1.81 1.59 1.41
Long Term Debt (MM) $26,950 $32,895 $33,222 $37,354
Net Debt / EBITDA 2.01 2.1 2.24 2.57

Amgen benefits from stable revenues and increasing reinvestment in the business, strong margins with a stable trend, and a steady stream of strong cash flows. The company's financial statements show wider gross margins than its peer group and positive EPS growth. Furthermore, Amgen has just enough current assets to cover current liabilities and significant leverage.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.