Amgen (AMGN) reported earnings after the bell Monday. The company beat on both the top and bottom line. Amgen’s consistent ability to beat estimates and its low valuation look compelling, especially if we get a significant pullback in this overbought market.
“Amgen Inc., a biotechnology medicines company, discovers, develops, manufactures, and markets human therapeutics based on advances in cellular and molecular biology for grievous illnesses primarily in the United States, Europe, and Canada”. (Business Description from Yahoo Finance)
8 reasons Amgen is a buy at $59 a share after earnings:
- It is selling near the bottom of its five-year valuation based on P/S, P/B, P/E and P/CF.
- Amgen has an A+ rated balance sheet, low beta (.46) and almost $6 a share in net cash on its books.
- Its earnings beat is part of continuing trend. It has now beat consensus earnings estimates for seven straight quarters.
- Amgen throws off a large amount of operating cash flow (almost $6B a year) and is selling at just 9 times operating cash flow.
- It recently decided to use that cash flow to pay a dividend and will yield just under 2%.
- It also has repurchased approximately 15% of its shares outstanding over the last four years.
- Amgen set aside $780mm to settle outstanding lawsuits, which should eliminate an overhang on the stock and raised its 2011 guidance on its earnings report/conference call.
- The stock price is under analysts’ price targets. S&P has a $68 price target on Amgen and median analysts’ price target is $67
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.