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.
