Amgen (AMGN) is a global biotech company (the first of its kind) which discovers, develops, manufactures and delivers human therapeutics. Since last writing about the company back on 13Jun13 I said that it is a value and dividend growth story. On July 30, 2013, the company reported second quarter earnings of $1.89 per share, which beat the consensus of analysts' estimates by $0.15. The stock is up 8.86% since 13Jun13 and is beating the S&P 500, which has gained 2.69% in the same time frame, and with that in mind I'd like to take a moment to evaluate the stock on a fundamental, financial and technical basis to see if it's worth picking up some more Amgen right now for the healthcare sector of my dividend portfolio and see if anything has changed since that last time I wrote about it.
Amgen currently trades at a trailing 12-month P/E ratio of 17.63, which is fairly priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 12.67 is currently inexpensively priced as well for the future in terms of the right here, right now. Next year's estimated earnings are $8.28/share and I'd consider the stock cheap until at least $124. The one-year PEG ratio (1.5), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that Amgen is fairly priced based on a 1-year EPS growth rate of 11.69%.
On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. Amgen boasts a dividend of 1.79% with a payout ratio of 27.4% of earnings while sporting return on assets, equity and investment values of 8.6%, 23.2% and 10.8%, respectively, which are all respectable values, but nothing to write home about. Because I believe the market may get a bit choppy here and I would like a safety play, I believe the 1.79% yield of this company is good enough for me to take shelter in for the time being. The company has been increasing its dividends for the past 2 years raising each time at a minimum of 28%!
Looking first at the relative strength index chart [RSI] at the top, I see the stock muddling around in middle territory with a value of 46.63 but with downward trajectory, which is a bearish pattern. To confirm that, I will look at the moving average convergence-divergence [MACD] chart next and see that the black line is below the red line with the divergence bars increasing in height to the downside, indicating the stock has downward momentum. As for the stock price itself ($104.91), I'm looking at the 20-day moving average ($107.95) to act as resistance and the 50-day moving average ($102.75) to act as support for a risk/reward ratio, which plays out to be -2.06% to 2.9%.
- Goldman Sachs slapped a "buy" rating on the stock indicating that it has three potential blockbuster drugs in the pipeline; AMG145 for high cholesterol, AMG785 for osteoporosis, and AMG827 for psoriasis. "Blockbuster drug" statuses are generally what makes shares of drug stocks rocket upwards. Goldman also states that any news whatsoever out of AMG423 (heart failure drug) is just icing on the cake.
- The company has reportedly raised its bid for Onyx Pharmaceuticals (ONXX) to $130 but nothing official has been released yet.
Amgen is still inexpensively valued based on future earnings and fairly valued on future growth prospects (one-year outlook). Financially, the dividend payout ratio is very low and I don't doubt management will be able to continue to increase the dividend in double digits going forward. The technical situation of how the stock is currently trading is what is telling me that it can trade a bit lower for now as the stock has downward trajectory on the RSI and MACD charts. Because it is at such a good value right now I'm going to buy a small batch in the stock for now in hopes that I can get a larger stake at a later date with a higher yield.
Disclaimer: These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!