On Monday September 10, analysts upgraded the shares of Amgen, Inc. (NASDAQ:AMGN) and Sanofi (NYSE:SNY), giving both companies a very positive "Buy" rating. When an analyst upgrades a stock, it usually results in the stock trading notably higher (higher than 1%) than the company's previous close. In the case of both AMGN and SNY, shares were actually trading pretty flat in the wake of both upgrades, although, given the fundamentals of both companies, I strongly believe they should be trading much higher.
Amgen, Inc., which opened trading on Monday at $84.53/share, (up just 0.67% from Friday's close) was upgraded by UBS AG on Monday. The analyst firm adjusted their rating from a Neutral to a Buy and set an $80.00/share price target.
The Thousand Oaks, California-based firm, is 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. Its principal products include Neulasta and NEUPOGEN to stimulate the production of neutrophils, which is type of white blood cell that helps the body fight infections; Enbrel, an inhibitor of tumor necrosis factor that plays a role in the body's response to inflammatory diseases; and Aranesp and EPOGEN erythropoiesis-stimulating agents, which stimulate the production of red blood cells.
When it comes to Amgen, there are two things potential investors should consider from a fundamental perspective. The first thing long-term investors should consider is the company's operating margin over the last 12 months and how AMGN is able to outpace some of the competition within the healthcare, and more specifically the drug-maker sector. Over the last 12 months, AMGN has demonstrated an operating margin of 34.54%, whereas direct competitor Johnson & Johnson (NYSE:JNJ) has only managed to demonstrate an operating margin of 25.24%. By comparing those numbers we're able to see that AMGN's operating margin is actually 36.84% higher than that of JNJ's, which potential investors should certainly consider before establishing a position.
The second thing to consider in terms AMGN is the company's profit margin and how it compares with some of the company's industry-based competitors. Over the last 12 months, AMGN has demonstrated a profit margin of 23.41% whereas Merck (NYSE:MRK) has only managed to demonstrate a profit margin of 14.46%. If we examine those numbers a bit closer, AMGN's profit margin is actually 61.90% better than the profit margin of Merck, which from a growth standpoint is certainly something to consider, and something that should be driving the stock much higher than 0.67%.
Sanofi, which opened trading on Monday at $42.00/share, (down nearly 0.95% from Friday's close) was upgraded by Bank of America on Monday. The analyst firm adjusted their rating from a Neutral to a Buy but did not designate a new price target.
The Paris, France-based firm, together with its subsidiaries, researches, develops, manufactures, and markets healthcare products worldwide. Its principle pharmaceutical products include Lantus and Apidra analogs of human insulin; Insuman range of human insulin solutions and suspensions; Amaryl, an oral once-daily sulfonylurea; BGStar and iBGStar blood glucose meters; enzyme replacement therapies, such as Cerezyme to treat Gaucher disease, Fabrazyme to treat Fabry disease, and Myozyme/Lumizyme to treat Pompe disease; Taxotere, a taxane derivative for various cancer types; Eloxatine treating colorectal cancer; and Jevtana for patients with prostate cancer. The company's other flagship products comprise thrombosis medicines, including Plavix anti-platelet agent indicated for atherothrombotic conditions and Lovenox for the prevention and treatment of deep vein thrombosis and for unstable angina and myocardial infarction; cardiovascular medicines consisting of Multaq, an anti-arrhythmic agent and Aprovel/CoAprovel for hypertension treatments; Renagel/Renvela oral phosphate binders used in patients with chronic kidney disease on dialysis to treat high phosphorus levels; and Synvisc and Synvisc-One visco-supplements used to treat pain associated with osteoarthritis of certain joints.
When it comes to Sanofi, there are a few things potential investors should consider from a fundamental perspective. The first thing long-term investors should consider is the company's profit margin over the last 12 months and how SNY is able to outpace some of the competition within the healthcare, and more specifically the drug-maker sector. Over the last 12 months, SNY has demonstrated a profit margin of 17.89%, whereas direct competitor Pfizer (NYSE:PFE) has only managed to demonstrate a profit margin of 15.76%. By comparing the profit margins of both companies we're able to see that SNY outpaces the profit margin of PFE by 13.51%.
The second catalyst to consider in terms SNY is the company's operating margin and how it compares with some of the company's industry-based competitors. Over the last 12 months, SNY has demonstrated an operating margin of 23.59% whereas direct competitor Novartis AG (NYSE:NVS) has only managed to demonstrate an operating margin of 20.89%. If we examine those numbers a bit closer, SNY's operating margin is actually 12.92% better than the operating margin of Novartis, which from a growth standpoint is certainly something to consider, and something that should be driving the stock much higher.
In my opinion, both stocks are trading a bit flat because both institutional traders and individual investors are waiting for what the Fed has to say on Tuesday. When it comes to the Fed, there are many ancillary things to consider especially whether or not the Fed will implement a third round of Quantitative Easing (QE3). If the market was a bit more on the bullish side and nerves were calmer we could certainly see the 1% or higher pop I referenced in the beginning of the article. I happen to think these are the best levels in which to establish a position, because if the reaction the Feds comments are a positive one these companies could very well see that short-term pop. The fundamentals speak for themselves and are certainly things potential investors need to consider from a long-term perspective.
Disclosure: I am long PFE, AMGN, SNY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.