Amgen Stock Significantly Overvalued According to DCF Analysis

Amgen Inc. (AMGN) has seen a strong year-to-date increase of 25.7% and a one-year gain of 39.3%, but a recent discounted cash flow (DCF) analysis suggests the stock is significantly overvalued. The DCF earnings-based intrinsic value of the company is estimated at $188.80, compared to its current price of $403.04, indicating a margin of safety of -113.5%. The DCF free cash flow (FCF)-based intrinsic value is slightly higher at $200.52, still pointing to overvaluation.

The DCF analysis employed a two-stage approach, with the first stage accounting for growth over the next ten years and the second stage reflecting a terminal growth rate. Key assumptions included a current EPS of $17.64, a 10-year growth rate of 4.6%, a 10-year Treasury rate of 5.29%, and a discount rate of 12%. The GF Value™ for Amgen, calculated at $367.83, also supports the conclusion that the stock is overvalued.

Amgen's GF Score™ of 85/100 suggests strong reliability of the DCF inputs, with a predictability rank of 4 out of 5 stars. However, the analysis notes that DCF models are highly sensitive to assumptions regarding growth and discount rates. The mixed signal from guru activity, with 12 gurus holding the stock and insiders selling $29.3 million over the past year, adds to the need for careful consideration by potential investors.

In summary, the consensus across the DCF earnings model, DCF FCF model, and GF Value™ indicates that Amgen is significantly overvalued. Investors should exercise caution and conduct further analysis before making any investment decisions.