AMGEN (AMGN) Very Profitable & a Good Value to Buy

Amgen Inc. (AMGN)

Sector: Healthcare

Industry: Biotechnology

Amgen Inc., a biotechnology medicines company, discovers, develops, manufactures, and delivers human therapeutics based on advances in cellular and molecular biology primarily in the United States, Europe, and Canada. The company markets primarily recombinant protein therapeutics in supportive cancer care, nephrology, and inflammation. Its principal products include Aranesp and EPOGEN erythropoietic-stimulating agents that stimulate the production of red blood cells

How valuable is the Stock?

How does one know how valuable a stock is? Cash is King! If this is the case, does AMGN have what it takes? When we think about value we have to think about the potential growth. How much potential? Something called the price to sales ratio gives us the best indicator of this. The more money a company has coming in through sales compared to how much working capital it has speaks volume of its health. The lower the price/sales ratio, the healthier it is. If we compare AMGN to its industry, we find they are almost neck & neck. The industry comes in at 1275.55 ratio while AMGN stands at half that—3.47. What? It appears that the industry as a whole was spending far more than it brought in last year—unprofitable! Not AMGN though! If we take seriously “Cash is King,” then the second most important thing we need to consider is how much money is flowing through this company as compared to its price. This is called the price to cash flow ratio. The closer the ratio gets to that magical “100” the less capability a company has. “100” means it can just pay its bills because the value of the company is equal to the amount of money coming in and no more. The industry stands at 20.6 while AMGN comes in far less and healthier at 9.00. AMGN stands as the industry leader! Since we compare companies to their industry to define their health there are two more ratios that we consider. Each ratio is defined by how low it is. The lower the better value the company has. The price to earnings ratio (P/E Ratio) gives AMGN a huge edge, it is less than half the industries’. It shows that T is a really good buy compared to the industry.  

Our conclusion- T is still under valued and an extremely good buy! We give it a “A+”

How profitable is the Company?

If a company has a good sales force and the money is flowing, that is a possible good sign for an investment. But alone, this is not good. What if a company brings in money but then spends it as fast as it brings it in? What if it costs them almost as much to make a sale as it does to sell? These are important things to think about and know if you are going to put your money into a company. To know things like this, I would ask the question: “How much money is left over from a sale after you pay all your costs to make that sale?” This is called the gross margin. Comparing the industry to AMGN, the industry comes in at 62.90%, so for every dollar sold, 62.9 cents is left over. It costs the industry 37.1 cents to make one dollar. AMGN’s gross margin is a blistering 85.5%. Wow! It coats AMGN 11.4 cents to make a dollar. The only other question I would ask is: “How good is the company at controlling its costs?” This is sometimes referred to as the net profit margin. If we divide the net profit by net revenues we come up with a %. The higher the % the better at money management the company is. The industry’s net profit margin is a NEGATIVE 6.5%. So, for every dollar they make (after taxes) their REAL profit is (-6.5) cents. The industry as a whole is spending more than it takes in.  AMGN, on the other hand, comes in at 31.80%! They destroy the industry as a whole when put side by side for profitability.

Our Conclusion- this company is extremely profitable! We give it a “A+”

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