Amgen stock (NASDAQ NDAQ : AMGN) has seen an 8% rise this year, far better than the broader S&P500 index, which is down 18%. However, in the longer term, AMGN stock is up 39% from levels seen in late 2017, slightly underperforming the S&P 500 index, up 47%.
This 39% growth for AMGN stock since late 2017 can primarily be attributed to 1. the company’s P/S ratio rising 21% to 4.9x trailing revenues, from 4.1x in 2017, 2. Amgen’s revenue growth of 15% to $26.4 billion over the last twelve months, compared to $22.8 billion in 2017, and 3. a significant 22% fall in its total shares outstanding. Amgen AMGN has spent a whopping $40 billion on share repurchases since the end of 2017, resulting in a 22% decline in its total shares outstanding, bolstering its revenue per share metric, which rose 48% to $46.29 now, compared to $31.29 in 2017. Our dashboard on Why Amgen Stock Moved has more details.
Amgen’s expansion of some of its drugs, including Prolia, Otezla, and Repatha, are driving its revenue growth, while some of the older drugs, such as Enbrel and Neulasta, are seeing a y-o-y decline in sales. Enbrel – a rheumatoid arthritis and plaque psoriasis drug, and Amgen’s top-selling product – has seen its sales fall to $4.5 billion in 2021, compared to $5.4 billion in 2017. Although Enbrel’s market exclusivity is still far out (2029), it faces increased competition from AbbVie’s (NYSE: ABBV) Humira and Rinvoq, Pfizer’s (NYSE: PFE) Zeljanz, and Johnson & Johnson’s (NYSE: JNJ) Stelara. Given these factors, Amgen’s sales are expected to grow at a slower pace, with the consensus estimate of $27.3 billion in 2023, reflecting a 5% growth between 2021 and 2023.
Amgen is eyeing inorganic growth to boost its sales and pipeline. It acquired Otezla from Celgene CELG in 2019, and it has recently agreed to acquire ChemoCentryx in a $3.7 billion deal, giving it Tavneos – a drug approved for the treatment of anti-neutrophil cytoplasmic antibody-associated vasculitis with potential peak sales of around $2 billion.
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We estimate Amgen’s valuation to be $250, just a tad above its current market price of $242. Given that AMGN stock is already trading at a higher P/S multiple compared to the levels seen in 2017, and revenue is expected to grow at a slow pace in the near term, we don’t see any significant upside from its current levels. That said, any positive development in its pipeline will likely result in higher levels for Amgen.
While AMGN stock looks like it is fully valued, it is helpful to see how Amgen’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Phibro Animal Health vs. Tri Pointe Homes.
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