Intrinsic value of Amgen - AMGN

Previous Close

$180.53

  Intrinsic Value

$97.61

stock screener

  Rating & Target

sell

-46%

Previous close

$180.53

 
Intrinsic value

$97.61

 
Up/down potential

-46%

 
Rating

sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of AMGN stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 131.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.14
  2.10
  2.39
  2.65
  2.89
  3.10
  3.29
  3.46
  3.61
  3.75
  3.88
  3.99
  4.09
  4.18
  4.26
  4.34
  4.40
  4.46
  4.52
  4.56
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
Revenue, $m
  22,991
  23,474
  24,035
  24,672
  25,384
  26,170
  27,031
  27,966
  28,976
  30,063
  31,228
  32,474
  33,802
  35,215
  36,717
  38,309
  39,996
  41,780
  43,667
  45,661
  47,765
  49,985
  52,325
  54,792
  57,391
  60,128
  63,009
  66,041
  69,232
  72,589
  76,119
Variable operating expenses, $m
 
  2,833
  2,865
  2,902
  2,943
  2,989
  3,039
  3,093
  3,151
  3,214
  3,281
  1,878
  1,955
  2,037
  2,124
  2,216
  2,313
  2,417
  2,526
  2,641
  2,763
  2,891
  3,027
  3,169
  3,319
  3,478
  3,644
  3,820
  4,004
  4,199
  4,403
Fixed operating expenses, $m
 
  11,088
  11,366
  11,650
  11,941
  12,240
  12,546
  12,859
  13,181
  13,510
  13,848
  14,194
  14,549
  14,913
  15,286
  15,668
  16,059
  16,461
  16,872
  17,294
  17,727
  18,170
  18,624
  19,090
  19,567
  20,056
  20,557
  21,071
  21,598
  22,138
  22,691
Total operating expenses, $m
  13,197
  13,921
  14,231
  14,552
  14,884
  15,229
  15,585
  15,952
  16,332
  16,724
  17,129
  16,072
  16,504
  16,950
  17,410
  17,884
  18,372
  18,878
  19,398
  19,935
  20,490
  21,061
  21,651
  22,259
  22,886
  23,534
  24,201
  24,891
  25,602
  26,337
  27,094
Operating income, $m
  9,794
  9,553
  9,804
  10,120
  10,500
  10,942
  11,446
  12,014
  12,644
  13,339
  14,099
  16,402
  17,298
  18,266
  19,307
  20,425
  21,623
  22,903
  24,269
  25,725
  27,276
  28,924
  30,675
  32,533
  34,505
  36,594
  38,807
  41,150
  43,630
  46,252
  49,025
EBITDA, $m
  11,899
  12,052
  12,328
  12,672
  13,083
  13,559
  14,102
  14,710
  15,384
  16,126
  16,937
  17,819
  18,774
  19,803
  20,910
  22,098
  23,369
  24,727
  26,176
  27,719
  29,361
  31,106
  32,959
  34,925
  37,010
  39,219
  41,558
  44,033
  46,652
  49,421
  52,348
Interest expense (income), $m
  1,300
  1,178
  905
  939
  977
  1,020
  1,068
  1,120
  1,176
  1,237
  1,303
  1,374
  1,449
  1,529
  1,614
  1,705
  1,801
  1,903
  2,011
  2,125
  2,245
  2,373
  2,507
  2,648
  2,797
  2,954
  3,119
  3,294
  3,477
  3,669
  3,872
Earnings before tax, $m
  9,163
  8,375
  8,899
  9,181
  9,522
  9,921
  10,379
  10,894
  11,468
  12,101
  12,796
  15,028
  15,849
  16,737
  17,693
  18,720
  19,822
  21,000
  22,258
  23,600
  25,030
  26,551
  28,168
  29,885
  31,708
  33,640
  35,688
  37,857
  40,153
  42,582
  45,152
Tax expense, $m
  1,441
  2,261
  2,403
  2,479
  2,571
  2,679
  2,802
  2,941
  3,096
  3,267
  3,455
  4,058
  4,279
  4,519
  4,777
  5,054
  5,352
  5,670
  6,010
  6,372
  6,758
  7,169
  7,605
  8,069
  8,561
  9,083
  9,636
  10,221
  10,841
  11,497
  12,191
Net income, $m
  7,722
  6,114
  6,496
  6,702
  6,951
  7,243
  7,576
  7,952
  8,371
  8,834
  9,341
  10,970
  11,570
  12,218
  12,916
  13,666
  14,470
  15,330
  16,249
  17,228
  18,272
  19,382
  20,563
  21,816
  23,146
  24,557
  26,052
  27,635
  29,312
  31,085
  32,961

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  38,085
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  77,626
  40,402
  41,368
  42,465
  43,690
  45,043
  46,524
  48,133
  49,872
  51,744
  53,749
  55,893
  58,179
  60,612
  63,196
  65,936
  68,839
  71,911
  75,159
  78,590
  82,211
  86,032
  90,061
  94,307
  98,780
  103,490
  108,449
  113,668
  119,160
  124,937
  131,013
Adjusted assets (=assets-cash), $m
  39,541
  40,402
  41,368
  42,465
  43,690
  45,043
  46,524
  48,133
  49,872
  51,744
  53,749
  55,893
  58,179
  60,612
  63,196
  65,936
  68,839
  71,911
  75,159
  78,590
  82,211
  86,032
  90,061
  94,307
  98,780
  103,490
  108,449
  113,668
  119,160
  124,937
  131,013
Revenue / Adjusted assets
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
Average production assets, $m
  13,441
  13,732
  14,060
  14,433
  14,850
  15,310
  15,813
  16,360
  16,951
  17,587
  18,269
  18,997
  19,774
  20,601
  21,479
  22,411
  23,397
  24,442
  25,545
  26,712
  27,942
  29,241
  30,610
  32,053
  33,574
  35,175
  36,860
  38,634
  40,501
  42,464
  44,529
Working capital, $m
  34,806
  1,150
  1,178
  1,209
  1,244
  1,282
  1,324
  1,370
  1,420
  1,473
  1,530
  1,591
  1,656
  1,726
  1,799
  1,877
  1,960
  2,047
  2,140
  2,237
  2,340
  2,449
  2,564
  2,685
  2,812
  2,946
  3,087
  3,236
  3,392
  3,557
  3,730
Total debt, $m
  34,596
  23,207
  24,076
  25,063
  26,166
  27,384
  28,717
  30,165
  31,730
  33,414
  35,219
  37,149
  39,206
  41,396
  43,721
  46,187
  48,800
  51,565
  54,488
  57,576
  60,835
  64,274
  67,900
  71,721
  75,747
  79,986
  84,449
  89,146
  94,089
  99,288
  104,757
Total liabilities, $m
  47,751
  36,362
  37,231
  38,218
  39,321
  40,539
  41,872
  43,320
  44,885
  46,569
  48,374
  50,304
  52,361
  54,551
  56,876
  59,342
  61,955
  64,720
  67,643
  70,731
  73,990
  77,429
  81,055
  84,876
  88,902
  93,141
  97,604
  102,301
  107,244
  112,443
  117,912
Total equity, $m
  29,875
  4,040
  4,137
  4,246
  4,369
  4,504
  4,652
  4,813
  4,987
  5,174
  5,375
  5,589
  5,818
  6,061
  6,320
  6,594
  6,884
  7,191
  7,516
  7,859
  8,221
  8,603
  9,006
  9,431
  9,878
  10,349
  10,845
  11,367
  11,916
  12,494
  13,101
Total liabilities and equity, $m
  77,626
  40,402
  41,368
  42,464
  43,690
  45,043
  46,524
  48,133
  49,872
  51,743
  53,749
  55,893
  58,179
  60,612
  63,196
  65,936
  68,839
  71,911
  75,159
  78,590
  82,211
  86,032
  90,061
  94,307
  98,780
  103,490
  108,449
  113,668
  119,160
  124,937
  131,013
Debt-to-equity ratio
  1.158
  5.740
  5.820
  5.900
  5.990
  6.080
  6.170
  6.270
  6.360
  6.460
  6.550
  6.650
  6.740
  6.830
  6.920
  7.000
  7.090
  7.170
  7.250
  7.330
  7.400
  7.470
  7.540
  7.610
  7.670
  7.730
  7.790
  7.840
  7.900
  7.950
  8.000
Adjusted equity ratio
  -0.208
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  7,722
  6,114
  6,496
  6,702
  6,951
  7,243
  7,576
  7,952
  8,371
  8,834
  9,341
  10,970
  11,570
  12,218
  12,916
  13,666
  14,470
  15,330
  16,249
  17,228
  18,272
  19,382
  20,563
  21,816
  23,146
  24,557
  26,052
  27,635
  29,312
  31,085
  32,961
Depreciation, amort., depletion, $m
  2,105
  2,500
  2,524
  2,552
  2,583
  2,618
  2,655
  2,696
  2,740
  2,788
  2,838
  1,418
  1,476
  1,537
  1,603
  1,672
  1,746
  1,824
  1,906
  1,993
  2,085
  2,182
  2,284
  2,392
  2,505
  2,625
  2,751
  2,883
  3,022
  3,169
  3,323
Funds from operations, $m
  10,355
  8,614
  9,021
  9,254
  9,534
  9,860
  10,231
  10,648
  11,112
  11,622
  12,179
  12,388
  13,046
  13,755
  14,519
  15,338
  16,216
  17,154
  18,155
  19,222
  20,357
  21,565
  22,847
  24,208
  25,652
  27,182
  28,803
  30,518
  32,334
  34,254
  36,284
Change in working capital, $m
  1
  24
  27
  31
  35
  39
  42
  46
  50
  53
  57
  61
  65
  69
  74
  78
  83
  87
  92
  98
  103
  109
  115
  121
  127
  134
  141
  149
  156
  164
  173
Cash from operations, $m
  10,354
  8,590
  8,993
  9,223
  9,500
  9,822
  10,189
  10,603
  11,062
  11,568
  12,122
  12,327
  12,981
  13,686
  14,445
  15,260
  16,133
  17,066
  18,062
  19,124
  20,254
  21,456
  22,732
  24,087
  25,525
  27,048
  28,662
  30,370
  32,178
  34,090
  36,111
Maintenance CAPEX, $m
  0
  -1,003
  -1,025
  -1,049
  -1,077
  -1,108
  -1,143
  -1,180
  -1,221
  -1,265
  -1,312
  -1,363
  -1,418
  -1,476
  -1,537
  -1,603
  -1,672
  -1,746
  -1,824
  -1,906
  -1,993
  -2,085
  -2,182
  -2,284
  -2,392
  -2,505
  -2,625
  -2,751
  -2,883
  -3,022
  -3,169
New CAPEX, $m
  -837
  -292
  -328
  -373
  -417
  -460
  -503
  -547
  -591
  -636
  -682
  -729
  -777
  -827
  -878
  -931
  -987
  -1,044
  -1,104
  -1,166
  -1,231
  -1,299
  -1,369
  -1,443
  -1,520
  -1,601
  -1,686
  -1,774
  -1,867
  -1,964
  -2,065
Cash from investing activities, $m
  -8,658
  -1,295
  -1,353
  -1,422
  -1,494
  -1,568
  -1,646
  -1,727
  -1,812
  -1,901
  -1,994
  -2,092
  -2,195
  -2,303
  -2,415
  -2,534
  -2,659
  -2,790
  -2,928
  -3,072
  -3,224
  -3,384
  -3,551
  -3,727
  -3,912
  -4,106
  -4,311
  -4,525
  -4,750
  -4,986
  -5,234
Free cash flow, $m
  1,696
  7,295
  7,640
  7,801
  8,006
  8,254
  8,543
  8,876
  9,250
  9,667
  10,128
  10,235
  10,786
  11,384
  12,030
  12,726
  13,474
  14,276
  15,135
  16,052
  17,030
  18,072
  19,181
  20,360
  21,612
  22,941
  24,351
  25,845
  27,428
  29,104
  30,877
Issuance/(repayment) of debt, $m
  3,593
  -6,986
  869
  987
  1,103
  1,218
  1,333
  1,448
  1,565
  1,684
  1,805
  1,930
  2,057
  2,189
  2,325
  2,466
  2,613
  2,765
  2,923
  3,088
  3,259
  3,439
  3,626
  3,821
  4,026
  4,239
  4,463
  4,697
  4,943
  5,199
  5,469
Issuance/(repurchase) of shares, $m
  -2,910
  1,733
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  399
  -5,253
  869
  987
  1,103
  1,218
  1,333
  1,448
  1,565
  1,684
  1,805
  1,930
  2,057
  2,189
  2,325
  2,466
  2,613
  2,765
  2,923
  3,088
  3,259
  3,439
  3,626
  3,821
  4,026
  4,239
  4,463
  4,697
  4,943
  5,199
  5,469
Total cash flow (excl. dividends), $m
  2,095
  2,043
  8,509
  8,788
  9,109
  9,471
  9,876
  10,324
  10,815
  11,351
  11,933
  12,165
  12,843
  13,573
  14,355
  15,192
  16,087
  17,041
  18,058
  19,139
  20,289
  21,511
  22,807
  24,181
  25,638
  27,181
  28,814
  30,543
  32,371
  34,303
  36,346
Retained Cash Flow (-), $m
  -1,792
  -7,847
  -97
  -110
  -123
  -135
  -148
  -161
  -174
  -187
  -201
  -214
  -229
  -243
  -258
  -274
  -290
  -307
  -325
  -343
  -362
  -382
  -403
  -425
  -447
  -471
  -496
  -522
  -549
  -578
  -608
Prev. year cash balance distribution, $m
 
  33,682
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  27,878
  8,413
  8,678
  8,986
  9,336
  9,728
  10,163
  10,641
  11,164
  11,733
  11,950
  12,615
  13,330
  14,097
  14,918
  15,796
  16,734
  17,733
  18,796
  19,927
  21,129
  22,404
  23,757
  25,191
  26,710
  28,318
  30,021
  31,821
  33,725
  35,738
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  26,728
  7,701
  7,553
  7,399
  7,237
  7,060
  6,866
  6,651
  6,413
  6,151
  5,675
  5,383
  5,068
  4,733
  4,380
  4,014
  3,641
  3,266
  2,894
  2,532
  2,185
  1,859
  1,557
  1,283
  1,039
  826
  644
  492
  368
  269
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Amgen Inc. is a biotechnology company. The Company discovers, develops, manufactures and delivers various human therapeutics. It operates in human therapeutics segment. Its marketed products portfolio includes Neulasta (pegfilgrastim); erythropoiesis-stimulating agents (ESAs), such as Aranesp (darbepoetin alfa) and EPOGEN (epoetin alfa); Sensipar/Mimpara (cinacalcet); XGEVA (denosumab); Prolia (denosumab); NEUPOGEN (filgrastim), and other marketed products, such as KYPROLIS (carfilzomib), Vectibix (panitumumab), Nplate (romiplostim), Repatha (evolocumab), BLINCYTO (blinatumomab), IMLYGIC (talimogene laherparepvec) and Corlanor (ivabradine). It focuses on human therapeutics for the treatment of serious illness in the areas of oncology/hematology, cardiovascular disease and neuroscience. Its product candidates in Phase III include Erenumab for episodic migraine, Aranesp for myelodysplastic syndromes, BLINCYTO for acute lymphoblastic leukemia and IMLYGIC for metastatic melanoma.

FINANCIAL RATIOS  of  Amgen (AMGN)

Valuation Ratios
P/E Ratio 17.3
Price to Sales 5.8
Price to Book 4.5
Price to Tangible Book
Price to Cash Flow 12.9
Price to Free Cash Flow 14
Growth Rates
Sales Growth Rate 6.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 29%
Cap. Spend. - 3 Yr. Gr. Rate 3.8%
Financial Strength
Quick Ratio 9
Current Ratio 0.2
LT Debt to Equity 101.1%
Total Debt to Equity 115.8%
Interest Coverage 8
Management Effectiveness
Return On Assets 11.8%
Ret/ On Assets - 3 Yr. Avg. 10.7%
Return On Total Capital 12.5%
Ret/ On T. Cap. - 3 Yr. Avg. 11.2%
Return On Equity 26.6%
Return On Equity - 3 Yr. Avg. 24.7%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 81.9%
Gross Margin - 3 Yr. Avg. 80.1%
EBITDA Margin 54.7%
EBITDA Margin - 3 Yr. Avg. 50%
Operating Margin 42.6%
Oper. Margin - 3 Yr. Avg. 37.5%
Pre-Tax Margin 39.9%
Pre-Tax Margin - 3 Yr. Avg. 34.8%
Net Profit Margin 33.6%
Net Profit Margin - 3 Yr. Avg. 30.4%
Effective Tax Rate 15.7%
Eff/ Tax Rate - 3 Yr. Avg. 12.1%
Payout Ratio 38.8%

AMGN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AMGN stock intrinsic value calculation we used $22991 million for the last fiscal year's total revenue generated by Amgen. The default revenue input number comes from 2016 income statement of Amgen. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our AMGN stock valuation model: a) initial revenue growth rate of 2.1% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for AMGN is calculated based on our internal credit rating of Amgen, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Amgen.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of AMGN stock the variable cost ratio is equal to 12.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $10818 million in the base year in the intrinsic value calculation for AMGN stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.9% for Amgen.

Corporate tax rate of 27% is the nominal tax rate for Amgen. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the AMGN stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for AMGN are equal to 58.5%.

Life of production assets of 13.4 years is the average useful life of capital assets used in Amgen operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for AMGN is equal to 4.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $29875 million for Amgen - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 729.668 million for Amgen is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Amgen at the current share price and the inputted number of shares is $131.7 billion.

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COMPANY NEWS

▶ Amgen Stock: Performance in 3Q17   [Oct-20-17 06:06PM  Market Realist]
▶ "Fast Money" final trades: MU, PYPL and more   [Oct-17-17 05:59PM  CNBC Videos]
▶ Can Biotech Stay Healthy Through the End of 2017?   [Oct-13-17 11:18AM  Barrons.com]
▶ Dow's Merck Bails On Cholesterol Drug, Prodding Shares Down   [Oct-11-17 05:58PM  Investor's Business Daily]
▶ Mylan Receives CRL for Neulasta Biosimilar   [01:14PM  GuruFocus.com]
▶ Amgen Wins Reprieve on Its 2nd-Best-Selling Drug   [Oct-10-17 07:00PM  Motley Fool]
▶ [$$] Ruling Goes Regeneron's Way   [02:28PM  Barrons.com]
▶ Biosimilars Could Boost Amgens Revenue Growth   [10:39AM  Market Realist]
▶ AbbVie's Fast Becoming a Top Stock to Buy Now   [Oct-08-17 08:01AM  Motley Fool]
▶ 3 Top Stocks Wall Street Insiders Love   [Oct-06-17 07:00PM  Motley Fool]
▶ Why Regeneron's Patent Win Is Worse For Amgen Than You Think   [05:37PM  Investor's Business Daily]
▶ Regeneron Pops After Judge Tosses Ban On Amgen-Rivaling Med   [Oct-05-17 04:50PM  Investor's Business Daily]
▶ [$$] Appeals Court Rules Against Amgen in Patent Case   [01:51PM  The Wall Street Journal]
▶ Why Amgen is Sliding   [11:13AM  Barrons.com]
▶ Stocks With Rising Relative Strength: Amgen   [03:00AM  Investor's Business Daily]
▶ CytomX Breaks Out On Mash-Up With Amgen In Immuno-Oncology   [Oct-04-17 04:25PM  Investor's Business Daily]
▶ Why Shares in AbbVie Soared 18% in September   [Oct-03-17 09:00PM  Motley Fool]
▶ Earnings Win Lifts This Sector; 2 Top Equity Plays In Buy Zone   [04:15PM  Investor's Business Daily]
▶ AbbVie: Better Late Than Never   [10:03AM  Barrons.com]
▶ AbbVie, Amgen Resolve Humira Patent Dispute   [Sep-29-17 03:09PM  GuruFocus.com]
▶ AbbVie's Humira Is an Ageless Wonder   [11:55AM  Bloomberg]
▶ AbbVie, Amgen Reach Settlement in Humira Patent Dispute   [12:07AM  The Wall Street Journal]
▶ AbbVie, Amgen Reach Humira Settlement   [Sep-28-17 05:44PM  The Wall Street Journal]
▶ Why Amgen's Drug Win Sent AbbVie Stock Into The Stratosphere   [04:52PM  Investor's Business Daily]
▶ AbbVie: Has the Humira Cloud Lifted?   [12:46PM  Barrons.com]
▶ 5 Stocks That May Win Big FromTax Reform   [Sep-27-17 03:00PM  Investopedia]
▶ Short Sellers Hike Bets in Major Biotechs   [10:25AM  24/7 Wall St.]
▶ Amgen reaffirms 2017 guidance in wake of Hurricane Maria   [Sep-25-17 09:47AM  MarketWatch]
▶ Amgen Provides Update On Hurricane Maria   [09:00AM  PR Newswire]
▶ Amgen challenge to Genentech $6 billion cancer drug OK'd by FDA   [Sep-19-17 08:31PM  American City Business Journals]
Financial statements of AMGN
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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