Amgen, Inc. (NASDAQ: AMGN) stock has had a massive upside move from the 2011 low below $50 to over $170 recently. Do the company’s fundamentals justify even more upside or will they push the stock lower to allow valuations to normalize?
Let’s take a look at both the fundamental and technical picture for Amgen to get a clearer picture of who will win the battle between the bulls and the bears.
What The Bulls See In Amgen
- Some reasonable valuation metrics:
- An enterprise value of $127 billion that exceeds the market capitalization of $123 billion
- Net profit margins of 25.71 percent that spin off over $6.41 billion in positive levered, free cash flow annually
- Good management effectiveness metrics:
- Return on assets of 6.35 percent
- Return on equity of 21.55 percent
- A nice current ratio of 4.95
- A dividend yield of 1.9 percent annually
What The Bears See In Amgen
- Some rich valuation metrics:
- A price-to-sales ratio of 6.07
- A price-to-book ratio of 4.74
- A PE ratio of just under 16 versus estimated revenue and earnings growth rates for next year of 4 percent and 12 percent, respectively
- Some questionable balance sheet metrics:
- Total debt of $30 billion versus total cash of $27 billion
- Total debt-to-equity ratio of 119.15 percent
The Technical Take On Amgen SharesTechnicians note that Amgen failed to make a new all-time high during the most recent rally, unlike so many of their biotechnology brethren. The stock now appears to be in the midst of a downside correction, with support coming in at around $155 to $157 where the short-term uptrend line comes into play (with corresponding horizontal line support).
If that level fails to hold up for the bulls, the February low at $147.42 would likely come into play. Resistance for Amgen comes in at horizontal line at $163.46 and is backed up by the daily closing high for AMGN at $171.64.
OverallAmgen may end up being a screaming “buy” at some point soon, but that will likely only be the case once more of a sell-off takes prices down to support at $155.
At that level, valuations may still not be irresistible, but technical buyers will be trying their hand. Fundamental buyers would likely require more of a decline to allow valuations to become more favorable.
Maybe a drop to one of the lower uptrend lines at $140 or $130 would do the trick.
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