Here I will analyze Amgen Inc Stock form investment point of view, and see if there is an opportunity to invest in this company or not.
Before doing any thing, let see what Amgen business is and how it will be in the future. From Amgen website we can see that its business basically in medicine and drugs development feild.
Based in the statista.com, the global spending in medicine and drugs will increase in year 2026 to reach 1,765 Billion in year 2026, where it is 1,423.5 Billion in 2021, which means that sales of medicine and drugs will increase with about 23%in five years.
Now go back to Amgen company and see how it EPS doing in the last 10 years. Based on macrotrend.net website, Amgen EPS increased from 2012 where it was 5.67$ until it reached 12.52$ in 2022, with growth rate of 8.24%.
Use the growth rate mention above which is 8.24% to see what Amgen EPS will be in five years from now, that means in 2027, and that can be reached by applying the well-knowing financial formula of future value, which is as following:
FV=PV(1+i)n
- Where PV = Amgen EPS in year 2022 = 12.52
- i = growth rate of Amgen EPS estimated above = 8.24
- n = years of investment = 5 years in 2027
By applying the above formula, Amgen EPS will reach 18.6$ in year 2027.
All what remaining now is to find the lowest (P/E) ratio for Amgen company in last ten years, and why choosing the lowest ratio, because I am being conservative investor in this analysis and that what should be done.
In 2016 was the lowset (P/E) ratio Amgen that ever had which was 14.64 based in morningstar.com.
Now all what remain is to multiply (P/E) ratio that mentioned above to Amgen’s EPS that calculated to get Amgen Stock price in 2027, which is as following:
Amgen’s Stock price in 2027= (14.64)*(18.6)= 272.3 $
As discussed above, it ‘s fair to say that Amgen stock price will be 272.3$ below its value now as of December 2022 which is 285.57$. That means as an investor if you buy Amgen stock now, you only get the dividend that distributed to shareholders at the end of each fiscal year and the stock will be deprecated by the market. But as an intelligent investor you can wait for a dip in Amgen’s stock and buy it specially if margin of safety was 70$ dollars and above.
Margin of safety = Amgen’s Stock price 2027 in 272.3 – Amgen’s Stock current price.
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