What do the “experts” say about Amgen, Inc. (NASDAQ:AMGN)’s valuation? S&P Capital IQ pegs the biotech’s fair value at around $113 per share. That’s a little higher than the stock’s current price.
Amgen’s potential for revenue and earnings growth includes a big positive, a big negative, and a big question mark.
The big positive stems from anti-inflammatory drug Enbrel. Amgen made $4.2 billion last year from the drug. Combined with Pfizer’s $3.7 billion, that puts Enbrel in a solid No. 2 position behind market leader Humira. Sales continue to grow strongly — and Amgen stands to profit even more as Pfizer relinquishes its North American royalties later in 2013.
That big negative comes from Neulasta/Neupogen. A biosimilar for the drug franchise hits the market in November. Amgen will soon need to replace the inevitable lost revenue.
Then there’s the big question mark about Amgen’s pipeline. The biotech has several drugs in late-stage clinical studies. An announcement of phase 3 results for one of them — ovarian cancer drug Trebananib — is expected this summer.
I suspect that Amgen will experience solid growth over the next few years. However, that assumes continued strength for Enbrel and Xgeva/Prolia, as well as generally good news from the company’s pipeline.
Overall, I think that Amgen stock still looks to be a reasonable buy for now. There are better alternatives in my view, though. I rank Celgene and Gilead more highly when growth potential is factored into the equation. However, I like Amgen’s 1.8% dividend yield. That’s something the others don’t have. For this month, Amgen stock checks out fine.
The article Amgen Stock Checkup for May originally appeared on Fool.com and is written by Keith Speights.
Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool recommends Celgene and Gilead Sciences.
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