Amgen Inc (AMGN)

Conclusion

Amgen is a US biopharmaceutical company whose main products include Enbrel, Prolia, Repatha, Otezla and XGEVA. At a price of 460.42 USD on 2026-11-06, its market capitalisation is 249.0 billion USD.

The verdict is overvalued. The price-to-earnings ratio of 26.5x is 27.9% above its ten-year median of 20.7x, and the enterprise value to EBITDA of 16.0x is 24.1% above its median of 12.9x. The fair value band runs from 272.85 to 409.27 USD with a midpoint of 341.06 USD, giving a margin of safety of -25.9% at the current price. The DCF gives 322.15 USD per share, and the fair value from historical multiples is 359.96 USD. The reverse DCF implies 9.5% annual growth, while revenue has grown 7.6% a year over five years and free cash flow per share has fallen 2.3% a year.

The strongest supports are a return on invested capital of 21.3% against a WACC of 8.0%, and a Piotroski score of 7 out of 9. The weakest numbers are the price-to-free-cash-flow ratio of 26.0x, which is 73.7% above its ten-year median, the net debt to EBITDA of 2.25x, and the five-year decline in free cash flow per share. A slowdown in revenue growth or a further fall in free cash flow per share would weaken the case most.

Financial health

Financial strength is yellow: the current ratio of 1.48 is good, while the Altman Z-score of 2.56, net debt to EBITDA of 2.25x and interest coverage of 5.19x are neutral. The quick ratio is 1.01 and debt to equity is 3.76x. The Altman Z-score sits in the grey zone. The Altman model was designed for manufacturers, and Amgen is a drug company, so the result is only a rough guide. Insolvency risk: low, about 1.9% by the estimate of the Ohlson model over one to two years, based on figures as of 2025-12-31. The company does not report a separate figure for interest expense in this analysis, so interest coverage rests on the TTM figure alone.

Earnings quality

Earnings quality is green, supported by a Piotroski score of 7 out of 9 and free cash flow conversion of 1.39x over five years. TTM conversion is 1.02x. The accrual ratio is -2.5% for 2025, which is a conservative sign. Stock-based compensation is 1.3% of revenue, and free cash flow after it is 9.09 billion USD. The share count fell at a 5-year compound rate of 1.7% a year, which points to buybacks. The Beneish M-score is not available. Amgen beat earnings estimates in all 8 of the last quarters, with an average surprise of 11.3%. Analysts' current-year estimates were cut over the last 30 days, with 9 downgrades against 7 upgrades.

Profitability

Profitability is green, with four of four measures assessed as good. The operating margin is 35.5% against a ten-year median of 36.1%, and the net margin is 24.1% against a median of 24.4%. The gross margin is 74.0% against a median of 75.7%. ROIC is 21.3% against a WACC of 8.0%, a ROIC minus WACC value of 13.3%, which creates value. The five-year median ROIC is 18.6%. The DuPont split shows a net margin of 21.0%, an asset turnover of 0.41x and an equity multiplier of 10.5x, so the trailing return on equity of 65.4% is heavily inflated by leverage.

Growth

Growth is yellow. Revenue compounded at 11.8% over three years, 7.6% over five years and 5.4% over ten years. EPS grew 5.5% over three years, 2.9% over five and 4.6% over ten. Free cash flow per share fell 2.7% a year over three years and 2.3% over five, though it rose 3.1% over ten. Revenue grew in 8 of the last 10 years. Analysts expect next-year EPS growth of 5.6%, with estimates raised 2.7% over 90 days.

Valuation

Valuation is red, with the verdict assessed as bad. Against ten-year medians, the price-to-earnings ratio of 26.5x is 27.9% higher, the price-to-sales ratio of 6.4x is 17.0% higher, and the price-to-book ratio of 17.4x is 2.4% higher. The DCF gives 322.15 USD per share at a discount rate of 8.87%, and 56.6% of its value sits in the terminal value. The fair value is an order of magnitude built on fixed assumptions, including a 5% equity risk premium and capped growth, not a price target. The reverse DCF implies 9.5% growth against 7.6% revenue growth over five years. The dividend yield is 2.2%, with a payout of 56.0% of free cash flow.

Risks

The main risk is that the market keeps paying a premium that the delivered growth cannot support. Free cash flow per share has declined over five years, so a continued fall would weaken the case behind the DCF. Net debt to EBITDA of 2.25x and the Altman Z-score in the grey zone leave less room if earnings weaken. Downward estimate revisions for the current year would also weigh on the price. The Beneish M-score is not available. This analysis has no debt maturity schedule and no revenue split by segment or product, so the effect of patent expiries or single products cannot be assessed.