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Does Amgen Inc’s (NASDAQ:AMGN) Past Performance Indicate A Weaker Future?

Assessing Amgen Inc’s (NASDAQ:AMGN) performance as a company requires looking at more than just a years’ earnings data. Below, I will run you through a simple sense check to build perspective on how Amgen is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its biotechs industry peers. View our latest analysis for Amgen

Was AMGN weak performance lately part of a long-term decline?

I look at the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This blend enables me to assess many different companies on a more comparable basis, using new information. For Amgen, its most recent trailing-twelve-month earnings is US$1.98B, which compared to the prior year’s figure, has plunged by a large -74.37%. Given that these figures may be somewhat nearsighted, I have calculated an annualized five-year value for AMGN’s net income, which stands at US$5.46B This doesn’t look much better, as earnings seem to have consistently been diminishing over time.

NasdaqGS:AMGN Income Statement Mar 15th 18
NasdaqGS:AMGN Income Statement Mar 15th 18

What could be happening here? Well, let’s look at what’s going on with margins and if the entire industry is feeling the heat. Over the last few years, revenue growth has been lagging behind which suggests that Amgen’s bottom line has been driven by unsustainable cost-reductions. Eyeballing growth from a sector-level, the US biotechs industry has been growing its average earnings by double-digit 24.94% over the prior year, and 20.47% over the past half a decade. This means whatever uplift the industry is benefiting from, Amgen has not been able to leverage it as much as its industry peers.

What does this mean?

Amgen’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Generally companies that experience an extended period of decline in earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the recent industry disruption and expansion. I suggest you continue to research Amgen to get a more holistic view of the stock by looking at:

  • 1. Future Outlook: What are well-informed industry analysts predicting for AMGN’s future growth? Take a look at our free research report of analyst consensus for AMGN’s outlook.

  • 2. Financial Health: Is AMGN’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.

  • 3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.

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