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Amgen: A Great Value In A Shaky Market

Oct. 03, 2021 6:14 PM ETAmgen Inc. (AMGN) Stock33 Comments
James Bjorkman profile picture
James Bjorkman


  • Amgen's stock price has fallen quite a bit recently amid political turmoil.
  • However, Amgen's fundamentals are solid. Its products remain popular, sales are increasing, and it has a strong product pipeline.
  • With a decent and growing dividend above 3% that appears safe and is likely to be raised again soon, Amgen is a compelling valuation at current price levels.

Vaccine Approved

kemalbas/iStock via Getty Images

If you're like me, you may have some doubts about this market. Political wrangling has sent stocks down. In truth, the market needed a break, as the S&P 500 had spent 227 trading days without

Amgen sales growth Q2 2021

Amgen total return 2017-2021 vs. S&P 500 - Seeking Alpha

Amgen ten-year price to sales history - Seeking Alpha

Amgen price to cash flow - Seeking Alpha

Amgen 10-year dividend growth history - Seeking Alpha

Amgen Sales Abroad 2020

Amgen price-to-book ratio - Seeking Alpha

This article was written by

James Bjorkman profile picture
I had my first passbook savings account in the 1960s, which taught me to invest, and lost money in the 1987 crash. Subsequently, I have run investor chat rooms and an investing blog. I have traveled across the country to lecture on investing, which is a lot of fun because it is great to meet fellow investors. I also am a published author (aside from SA) and maintain a blog covering many different topics at Filminspector.com. I bought my first property in 1993. Real estate is my passion and I enjoy writing about it. I usually invest in income stocks such as REITs, but also follow, invest in, and occasionally cover other areas in articles. I also write in various forums about World War II. Oh, and I was mentioned in "Scam Dogs And Mo-Mo Mamas: Inside the Wild and Woolly World of Internet Stock Trading" (ISBN-13: 978-0060196202) (2000), by Wall Street Journal reporter John R. Emshwiller.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of AMGN either through stock ownership, options, or other derivatives. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (33)

Debt/book equity and price/book are high as a result of the share repurchases that shrink book equity
James Bjorkman profile picture
@XPMer Yes, interesting points. Thanks for reading and commenting!
Thank you for the article. Seeing $AMGN go below its 52 week low, I started a position this week. I see it's highly volatile, so I'm doing only limit orders on this one.
James Bjorkman profile picture
@simply_divs Great to hear you see the value there, simply_divs. Buy 'em when they're cheap! Thanks for reading and commenting.
Merrill adds Amgen to their top ten Value picks today. Here is the whole list:

Name Ticker Trailing 12-Month PE

James Bjorkman profile picture
@ahimsaka Thanks for updating us! Pretty impressive to get on that list.
@ahimsaka been adding to AMGN and LMT at these prices
SleepyInSeattle profile picture
@ahimsaka Thanks for the update.
BM Cashflow Detective profile picture
Overall good article. Except for this sentence.

"The main reason to be cautious about Amgen, though, is simply that it is out of favor with the market."

This is a reason to more reduce your caution because the known bad news has already been priced in.

In other words. Well-known news are taken into account and do not cause any further price damage.

The strong increase in emotional fear among investors thus reduces the risk of further fear arising due to known factors.

The focus on the promising fundamentals should make the view clear for purchases with high conviction.

I'm long $AMGN

Because this company has earned purchases with great conviction.
James Bjorkman profile picture
@BM Cashflow Detective Thanks for your tip, BM Cashflow Detective! Buying contrarian plays is kind of my thing. I appreciate your reading and commenting!
craftbrewinfo profile picture
@BM Cashflow Detective A- credit rating, excellent balance sheet, industry leader, near 52 week low, DGR 3 and 5yr rates of 10.42% and 10.08% respectively, and $7.04 dividend per share = STRONG BUY
James Bjorkman profile picture
@craftbrewinfo it's hard to say that Amgen isn't a good value here, craftbrewinfo. The only question is how much it becomes a better value! Thanks for reading and contributing, I really appreciate it!
AMGN is one of the reasons we have a shaky market. Looking to buy back below $200.
James Bjorkman profile picture
@dmau3 Thanks for adding your perspective, dmau3, I appreciate your reading and commenting!
AMGN had an expensed line item of acquired in-process research and development $1,505 million in Q2, the very major part of decreased EBIT and hence net income/share per GAAP. I leave those more familiar with accounting to figure things out further.
SleepyInSeattle profile picture
Long AMGN and ABBV, each full position.
James Bjorkman profile picture
@SleepyInSeattle I own both as well, SleepyinSeattle. This is a great value sector to get in right now. Thanks for reading and commenting!
@SleepyInSeattle imo, AMGN is the better buy since it's revenue stream is much more diversified. ABBV has almost 60% of its revenue from one drug (Humira), and I believe their patents will expire in 2023 so biosimilars will begin taking a lot of market share from ABBV quite soon


AMGN also seems more shareholder friendly since they have consistently reduced their share count. In contrast, ABBV's share count rose a lot in 2020, which is a lot of shares to pay dividends on :/



Maybe of least importance, but still worth mentioning. Value line recently came out with a review that maintains their 3-5 year price target of $300-$370 and rates the financial strength as A++.
TaiPan profile picture
Looking at a price chart for the past three years, I see that AMGN rose to about $260 several times before declining again. Now it trending down more seriously, and if it is considered cheap today, and momentum has any force, it will be even cheaper tomorrow.

So why not wait until it starts rising, maybe 5% off the bottom (whatever that bottom is)? True. We won’t be getting the absolute bottom price, but that is almost impossible to do. Waiting until AMGN seems on the mend seems a safer way to buy than buying today and likely watching in dismay as it continues rolling down the hill.
James Bjorkman profile picture
@TaiPan I think it could bottom out a little lower, too. Timing is everything in life. Big firms tend to catch the middle of a move and not try to time the bottom or top. Thanks for reading and commenting!
TaiPan profile picture
@James Bjorkman

**Big firms tend to catch the middle of a move and not try to time the bottom or top.**

One of the few advantages we small investors have over the big money managers is agility: we don’t have to move much money so we can try to be more precise about when to buy and sell. Attempts to be clever don’t always work, mind you, but we have the room to try.

One problem with trying to time the market is that it is an emotional decision. We see an upward trend and assume it will continue trending up tomorrow, so why not get in today?

What I try to do is research the stock. see how many times it rose off a bottom only to decline again, and measure the distance between lows and temporary highs. If the distance is (say) 8% normally, then I would set a trailing-stop-buy at +9% or even +10%. This way I am staying out of the thrashing that can lead to whipsawing, knowing that if the stock actually rises more than its usual distance of 8%, this time the price will likely continue rising. By setting a trailing stop-buy, I am taking the emotion out of the decision.
James Bjorkman profile picture
@TaiPan Very analytical, sounds like a great system!
not encouraging to see a company with 80% debt/capital balance sheet showing a drop in after tax income of about 75% between Q3 2020 and Q2 2021.
James Bjorkman profile picture
@ahimsaka The company definitely has a lot of debt, I wish they'd rein that in a little but they know more about their business than I do. Thanks for reading and commenting!
@ahimsaka debt/book equity is generally going to be high in companies that have been repurchasing shares as that shrinks book equity, the denominator. Q2 is a distorted endpoint as the had a write off of in process R&D on an acquisition. This one time write-off will actually over time increase after tax income as amortization of the r&d is subsequently lower.
@XPMer recent long AMGN
Income4ever aka Cyclenut profile picture
Nicely done
Pass on AMGN
ABBV has much more growth potential its my top choice in Big Pharma
James Bjorkman profile picture
@Income4ever aka Cyclenut Thanks, Cyclenut!. Not every stock is for everyone, lots of good choices in this area right now.
Long in Biotech profile picture
@James Bjorkman never count Amgen out, seeds are being planted….
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