Amgen - The More Defensive Biotech - Episode 17 Podcast Transcript
This is episode 17. Today we are going to talk about Amgen with ticker symbol AMGN on the Nasdaq stock exchange. Before we get started, I'd like to invite you to find our website at StockMarketIdeasPodcast.com. There you can take a look at a number of research tools I use, as well as a performance page that tracks the stock price for each company I discuss from the date the episode is published. That's at StockMarketIdeasPodcast.com. All right, let's get started.
Thank you very much for joining me today, whatever it is that you are listening from. Today we're discussing Amgen, which is a large biotechnology company based out of California. In fact, it is one of the original biotech companies tracing its beginnings to the early 80s when it began developing numerous groundbreaking drugs. Since that time, it has grown into a $163-billion multinational company.
So just this past August it joined the Dow Jones Industrial Average during a shuffle with that index that took place in order to keep the sectors balanced. This seemed to highlight to some people the fact that Amgen has become a slightly less exciting company that we should expect little more than a steady stream of dividends from.
One analyst, William Meyers, recently wrote about this in a blog post about Amgen. Compared to many other companies in this space, Amgen already has a commercially successful portfolio of drugs currently available, in addition to its healthy pipeline of potential future drugs. This, according to Meyers, will probably mean that any success or failure of a particular drug that is under development won't swing the stock price as dramatically as it might for another company. It also allows for more breathing room when developing new products to add to its current portfolio. This mature portfolio may give some investors comfort in holding on to their stock for the long-term and reduce the focus on any specific drugs under development, attracting the most media attention for companies like Amgen.
The specific drugs that are critical to Amgen are important to understand for any investor, and they include many factors. Things like patents, competing treatments, and the various markets where these drugs will fill demand will drive revenue and profits in the future. I won't get into there here, but I will link to Meyers' article on my website and highly recommend you take a look at it.
There are a couple of interesting positive financial indicators to point out when looking at the fundamentals of Amgen. The first is that while gross profit margin is very wide, having consistently held above 80% for at least the past ten years, both operating margin at around 38% currently, and net margin at 30%, show a long term trend toward growth. This might indicate that Amgen and its pipeline have not seen pricing pressure and can operate efficiently to produce their products.
(Source: Gurufocus interactive chart for Amgen)
Another positive attribute to note is that revenue growth has a long history of being steady and positive overall going back many years, allowing us to put a bit more faith in this trend than with other companies.
Earlier I mentioned a dividend, and in this case, the dividend yield is at around 2.6%, with a healthy dividend payout ratio of 0.5. This tells us that it is very likely that this dividend will continue to be paid for years to come, giving us some cash back for holding the stock, while we also wait for any capital appreciation.
At a price to earnings ratio of about 19.5 currently and a forward PE of just over 14, Amgen may be at most fairly valued depending on what factors you are taking into consideration as a possible shareholder. As with any biotech company, there are many factors that should be understood before coming to a confident valuation. These can include the science behind pipeline products, policy or political considerations, as well as any patent issues or disputes taking place, just to name a few.
As always, I hope you have found this helpful. Have a fantastic day and bye for now.