Since September 2024, Amgen has been in a holding pattern, posting a small loss of 1.8% while floating around $314.91. The stock also fell short of the S&P 500’s 7% gain during that period.
Is now the time to buy AMGN? Or does the price properly account for its business quality and fundamentals? Find out in our full research report, it’s free.
Why Does AMGN Stock Spark Debate?
Founded in 1980 to pioneer genetic engineering techniques, Amgen (NASDAQ:AMGN) is a biotechnology company that develops medicines, focusing on treatments in oncology (cancers), cardiology (heart-related), and immunology (e.g. arthritis and psoriasis).
Two Positive Attributes:
1. Long-Term Revenue Growth Shows Momentum
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Luckily, Amgen’s sales grew at a decent 7.7% compounded annual growth rate over the last five years. Its growth was slightly above the average healthcare company and shows its offerings resonate with customers.
2. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Amgen has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the healthcare sector, averaging an eye-popping 32.2% over the last five years.
One Reason to be Careful:
New Investments Fail to Bear Fruit as ROIC Declines
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Amgen’s ROIC has decreased over the last few years. Only time will tell if its new bets can bear fruit and potentially reverse the trend.
Final Judgment
Amgen’s merits more than compensate for its flaws. With its shares trailing the market in recent months, the stock trades at 15.2× forward price-to-earnings (or $314.91 per share). Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
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