DCF Studio

    AMGN · NMS · Healthcare

    Amgen Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 325.38

    Market price

    USD 385.65

    Implied upside

    -15.6%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedReported capital expenditure averages 3.96% of revenue against depreciation of 14.55%. A business cannot depreciate more than it invests indefinitely. Capex has been set to 14.55% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.

    Value Per Share

    Perpetuity growth
    USD 325.38-15.6%
    Exit multiple
    USD 642.76+66.7%
    Market price
    USD 385.65

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn7bn14bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 41.1bnUSD 45.9bnUSD 51.3bnUSD 57.3bnUSD 64.1bn+11.8%
    EBITUSD 11.4bnUSD 12.7bnUSD 14.2bnUSD 15.9bnUSD 17.8bn+11.8%
    NOPATUSD 9.9bnUSD 11.1bnUSD 12.4bnUSD 13.9bnUSD 15.5bn+11.8%
    Add depreciation & amortisationUSD 6.0bnUSD 6.7bnUSD 7.5bnUSD 8.3bnUSD 9.3bn+11.8%
    Less capital expenditureUSD -6.0bnUSD -6.7bnUSD -7.5bnUSD -8.3bnUSD -9.3bn+11.8%
    Less increase in working capitalUSD -1.1bnUSD -1.3bnUSD -1.4bnUSD -1.6bnUSD -1.7bn+11.8%
    Free cashflow to firmUSD 8.8bnUSD 9.8bnUSD 11.0bnUSD 12.3bnUSD 13.8bn+11.8%
    Discount factor0.96430.89660.83370.77510.7207-
    Present valueUSD 8.5bnUSD 8.8bnUSD 9.2bnUSD 9.5bnUSD 9.9bn+3.9%
    Present Value Of The ForecastUSD 46.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.615Reported 0.426, pulled toward 1.0 (Blume)
    Cost of equity8.38%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 208.5bn79.2% of capital
    Total debtUSD 54.6bn20.8% of capital, book value as a proxy
    Tax rate12.7%Effective, capped at statutory
    WACC7.55%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 325.38

    79% of EV

    Forecast FCFF, final year
    USD 13.8bn
    Capex at depreciation, working capital in reinvestment
    USD 15.5bn
    Less reinvestment at g/ROIC (22.5% of NOPAT)
    USD -3.5bn
    Capitalised
    USD 12.0bn
    ROIC (reported)
    11.1%
    Terminal value, undiscounted
    USD 244.0bn
    Terminal value, discounted
    USD 175.9bn
    Enterprise value
    USD 221.8bn
    Less net debt
    USD 45.5bn
    Equity value
    USD 176.4bn

    Exit at 17.8x EBITDA

    Value per shareUSD 642.76

    88% of EV

    Terminal value, undiscounted
    USD 482.7bn
    Terminal value, discounted
    USD 347.9bn
    Enterprise value
    USD 393.9bn
    Less net debt
    USD 45.5bn
    Equity value
    USD 348.4bn

    Spread between methods: 66%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    5.55%491.63533.96589.84667.26781.96
    6.55%376.90398.40424.97458.76503.31
    7.55%300.15311.71325.38341.84362.15
    8.55%245.23251.51258.69267.00276.78
    9.55%203.99207.28210.91214.96219.55

    Outlined: this model. Green text: above today's price of 385.65. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year11.8%15.3%+3.5pp
    EBIT margin27.7%31.7%+4.0pp
    Discount rate7.5%6.9%-0.7pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.