The market and economy face several unique and challenging threats that are reminiscent of some of the most brutal bear markets of recent history.
The market’s primary concerns are slowing growth and inflation. This is a recipe for underperformance in stocks and bonds that likely won’t end until inflation materially lowers or the Fed hits the brakes on hiking rates due to significant pain for the labor market.
Although no one knows exactly when the bear market will end, history tells us that this is the ideal time to accumulate stocks with strong, secular growth prospects and attractive valuations. Among this group, investors should look at companies' improvements in operations that are being overlooked due to adverse market conditions. In today’s article, I want to talk about Amgen (AMGN), and why it’s a great long-term buy at current levels.
Company Background
AMGN is one of the original biotech companies and is a pioneer in the biologics space. Even today, 80% of the company’s revenues come from biologic products. Currently, its top 3 selling drugs are Enbrel for inflammatory diseases, Prolia for osteoporosis, and Neulasta which reduces infection risk in chemotherapy patients.
These 3 drugs accounted for nearly 50% of AMGN’s sales last year with 74% of sales coming from North America. This concentration is certainly a risk and one factor in the stock’s recent underperformance. However, the company has been seeing strong growth in international sales. It also has been aggressive in making acquisitions to keep its pipeline well-stocked.
GARP
AMGN is a well-diversified biotech company with a strong lineup of products, pipeline, and a management team with a track record of bringing profitable drugs through market through acquisitions or internal efforts.
Despite these attributes and the favorable sector dynamics listed above, the stock is quite cheap with a forward P/E of 13 and an above average dividend yield of 3.1%.
Last year, AMGN had EPS of $17.1 and revenue of $26 billion. This year, analysts are forecasting a modest improvement to $17.65 in EPS and $26.2 billion in revenue. It also has 22% profit margins which is nearly twice that of the S&P 500.
POWR Ratings
AMGN is also a standout in terms of the POWR Ratings with an overall grade of B which equates to a Buy. B-rated stocks have posted an average annual performance of 20.1% which outpaces the S&P 500’s average 8% gain.
In terms of its component grades, AMGN has an A for Quality which is consistent with its strong balance sheet, low debt, and well-regarded management team. Click here to see AMGN’s complete POWR Ratings.
What To Do Next?
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AMGN shares were trading at $244.70 per share on Wednesday morning, down $0.74 (-0.30%). Year-to-date, AMGN has gained 11.44%, versus a -23.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Jaimini Desai
Jaimini Desai has been a financial writer and reporter for nearly a decade. His goal is to help readers identify risks and opportunities in the markets. He is the Chief Growth Strategist for StockNews.com and the editor of the POWR Growth and POWR Stocks Under $10 newsletters. Learn more about Jaimini’s background, along with links to his most recent articles.
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