Amgen Inc Valuation – February 2016 $AMGN

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – February 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Amgen Inc (AMGN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): 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.


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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.


Downloadable PDF version of this valuation:

ModernGraham Valuation of AMGN

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $115,869,714,418 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.44 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 137.48% Pass
6. Moderate PEmg Ratio PEmg < 20 17.68 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.12 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 4.44 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.98 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

AMGN value chart February 2016

EPSmg $8.54
MG Growth Estimate 12.10%
MG Value $279.39
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $123.87
MG Value based on 0% Growth $72.61
Market Implied Growth Rate 4.59%
Current Price $151.07
% of Intrinsic Value 54.07%

Amgen, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PB ratio. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.73 in 2012 to an estimated $8.54 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.59% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. Amgen, Inc. performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

AMGN charts February 2016

Net Current Asset Value (NCAV) -$6.49
Graham Number $94.23
PEmg 17.68
Current Ratio 4.44
PB Ratio 4.12
Dividend Yield 2.09%
Number of Consecutive Years of Dividend Growth 6


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Most Recent Balance Sheet Figures

Balance Sheet Information Dec2015
Total Current Assets $38,518,000,000
Total Current Liabilities $8,667,000,000
Long-Term Debt $29,306,000,000
Total Assets $71,576,000,000
Intangible Assets $26,428,000,000
Total Liabilities $43,493,000,000
Shares Outstanding (Diluted Average) 766,000,000

Earnings Per Share History

Next Fiscal Year Estimate $10.60
Dec2015 $9.06
Dec2014 $6.70
Dec2013 $6.64
Dec2012 $5.52
Dec2011 $4.04
Dec2010 $4.79
Dec2009 $4.51
Dec2008 $3.77
Dec2007 $2.82
Dec2006 $2.48
Dec2005 $2.93
Dec2004 $1.81
Dec2003 $1.69
Dec2002 -$1.21
Dec2001 $1.03
Dec2000 $1.05
Dec1999 $1.02
Dec1998 $0.82
Dec1997 $0.59
Dec1996 $0.61

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $8.54
Dec2015 $7.14
Dec2014 $5.97
Dec2013 $5.43
Dec2012 $4.73
Dec2011 $4.22
Dec2010 $4.09
Dec2009 $3.60
Dec2008 $3.02
Dec2007 $2.54
Dec2006 $2.11
Dec2005 $1.70
Dec2004 $1.02
Dec2003 $0.65
Dec2002 $0.27
Dec2001 $0.98
Dec2000 $0.90

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies with a Low Beta – October 2015
The Best Companies of the Pharmaceuticals Industry – August 2015
The 10 Best Stocks For Value Investors This Week – 6/20/15
Amgen Inc. Analysis – June 2015 Update $AMGN
18 Companies in the Spotlight This Week – 3/21/15

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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