Stock (Symbol) |
Amgen (AMGN) |
Stock Price |
$145 |
Sector |
| Healthcare |
Data is as of |
| November 19, 2016 |
Expected to Report |
| Jan 26 – 30 |
Company Description |
 Amgen Inc. (Amgen) is a biotechnology company. The Company is engaged in discovering, developing, manufacturing and delivering human therapeutics. The Company’s sales and marketing forces are located in the United States and Europe. In the United States, it sells its products to pharmaceutical wholesale distributors. The Company also markets certain products directly to consumers through direct-to-consumer print and television advertising, as well as through the Internet. Outside the United States, the Company sells its products to healthcare providers and/or pharmaceutical wholesale distributors. The Company’s products include Neulasta (pegfilgrastim)/NEUPOGEN (filgrastim), Enbrel (etanercept), XGEVA/Prolia (denosumab), ESAs (erythropoiesis-stimulating agents), Sensipar/Mimpara (cinacalcet), Kyprolis and Evolocumab, among others. Source: Thomson Financial |
Sharek’s Take |
 During the past three qtrs shares of Amgen have gone from $150 to $174 and now $145. The main reason for the volatility is Biotechs rallied as Clinton is lost her lead in the presidential election, then tanked in the days leading up to the election as it seemed Clinton would win. AMGN gets a lot of its growth off price increases, which Clinton vowed to combat, and now the company can raise prices as it normally does, but I remember hearing Amgen management had already had planned to not raise prices next year. Amgen is the daddy of biotech stocks, having gone from $1 to $150 since 1990. In 2011 it became the first biotech to start issuing dividends and has increased the dividend each year since — from $0.56 to $4.00 in just 5 years. The company has multiple blockbusters on the market, and a robust pipeline with 10 new drugs expected by 2019 including late stage drugs to combat osteoporosis, migraines and heart failure. AMGN also sports a 50% profit margin, up from around 40% a few years ago. Amgen is one of America’s safest stocks. Management systematically underpromises to overdeliver and also buys back stock to help boost profits. This year it expects to buyback $3 billion in stock, vs a $108 billion market cap. AMGN has an Estimated Long-Term Growth rate of 8% in addition to a 2% yield, for an estimated total return of 10% per year (hypothetically). At 12x earnings, this stock is a solid value for conservative investors with solid upside long-term. |
One Year Chart |
 Last qtr AMGN grew sales 2%, with a negative 1% impact baked in from foreign exchange rates. US sales declined 1%. International sales rose 4% but would have increased 7% if it not for F/X. Analysts expected 3% profit growth last qtr. AMGN beat the street as it regularly does and came in with 11%. The company increased guidance, and 2016 profit estimates went from $11.36 to $11.56 since last qtr. Profit growth Estimates for the next 4 qtrs are: 7%, 2%, 7% and 2% but management underpromises to overdeliver. AMGN’s P/E came down from 15 to 12 since last qtr, and now the stock is a solid value. |
Fair Value |
 Last qtr I stated “I feel AMGN could take a breather” and a breather is what we got. Now the stock seems deeply undervalued. Looking at the one-year chart above, it seems like the stock should have recovered to $170 after the election. My Fair Value of 15x earnings equates to 29% upside in 2017 and 35% upside by 2018. Those numbers are some of the best of any conservative stock I cover. |
Bottom Line |
 Amgen is a core holding for conservative investors, and with the recent pullback in the stock this is an excellent time to build a position in the stock. Management does a lot of good things including drug development, stock buybacks and healthy 30% increases to the dividend (2011-2016). The company has good growth opportunity with its array of new drugs in development. I am moving AMGN up from 20th to 7th in the Conservative Growth Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 7 of 28 |
