• Investors may be wondering if Amgen's share price still offers value after a strong run, or whether most of the opportunity is already reflected in the stock.
• The stock closed at US$335.94, with returns of 1.6% over the last week, a decline of 2.5% over the last month, and gains of 2.5% year to date, 23.8% over 1 year, 68.6% over 3 years, and 68.3% over 5 years.
• Recent headlines around Amgen continue to focus on its position as a large biotechnology company, including ongoing attention on its product portfolio and pipeline, regulatory milestones, and the broader sector backdrop. Together, these set the context for how the market is weighing its prospects against current pricing.
• Amgen currently has a valuation score of 4 out of 6, which sets up a closer look at how traditional valuation methods stack up and why there may be an even better way to think about what the stock is really worth.

Approach 1: Amgen Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a stock could be worth by projecting the cash the company may generate in the future and discounting those cash flows back to today.

For Amgen, the model used is a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The latest twelve months Free Cash Flow is about $9.1b. Analysts and internal estimates project Free Cash Flow rising to $16.7b by 2030, with detailed projections from 2026 through 2035. Simply Wall St uses analyst estimates for the earlier years and then extrapolates further years using modest growth assumptions, all in $.

Discounting these projected cash flows back to today produces an estimated intrinsic value of $655.78 per share, compared with the recent share price of $335.94. On this basis, the model suggests Amgen stock trades at a 48.8% discount to its DCF estimate, which points to a meaningful gap between price and this intrinsic value output.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Amgen is undervalued by 48.8%. Track this in your watchlist or portfolio, or discover 46 more high quality undervalued stocks.

Approach 2: Amgen Price vs Earnings

For a profitable company like Amgen, the P/E ratio is a straightforward way to link what you pay for the stock to the earnings it generates per share. It helps you see how much investors are currently willing to pay for each dollar of earnings.

What counts as a "normal" or "fair" P/E depends on how fast earnings are expected to grow and how risky those earnings are. Higher expected growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk typically supports a lower P/E.

Amgen currently trades on a P/E of 23.24x, compared with the Biotechs industry average of 16.25x and a peer group average of 40.71x. Simply Wall St also calculates a Fair Ratio of 25.27x for Amgen. This Fair Ratio is a proprietary metric that reflects factors such as earnings growth, industry, profit margins, market cap and specific risks.

Because the Fair Ratio adjusts for these company specific drivers, it can be more informative than a simple comparison with peers or the broad industry. Amgen's current P/E of 23.24x sits below the Fair Ratio of 25.27x, which points to the stock trading below this Fair Ratio estimate.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Amgen Narrative

Earlier the article mentioned that there is an even better way to understand valuation, so meet Narratives, a simple way to connect your view of Amgen's business to numbers like future revenue, earnings, margins and a fair value that can be compared with the current share price.

A Narrative is your story about the company written in financial terms. It links what you believe about Amgen's pipeline, pricing, competition and execution to a forecast and then to a fair value that updates as new information such as news or earnings is added to the Simply Wall St Community page, which is already used by millions of investors.

For Amgen, one investor might align with a bullish Narrative that assumes revenue reaching US$44.4b, earnings of US$13.2b and a fair value around US$432.00. Another might lean toward a more cautious Narrative with revenue of US$36.7b, earnings of US$7.6b and a fair value closer to US$243.49. Comparing each Narrative's fair value with the current price can help you decide whether the stock looks attractive, expensive or about right based on your own expectations.

For Amgen, however, we will make it really easy for you with previews of two leading Amgen Narratives:

Fair value: US$349.66

Gap to fair value: about 3.9% below this narrative fair value based on the recent share price of US$335.94

Revenue growth assumption: 2.55% a year

• Assumes steady revenue growth supported by chronic disease treatments, biosimilars and a broad pipeline across obesity, cardiovascular disease and oncology.
• Builds in higher future profit margins and a future P/E of 24.0x, with analysts seeing Amgen as roughly fairly priced relative to their earnings forecasts.
• Highlights risks from drug pricing pressure, biosimilar competition, heavy R&D and manufacturing investment and potential regulatory or demographic headwinds.

Fair value: US$243.49

Gap to fair value: about 38.0% above this narrative fair value based on the recent share price of US$335.94

Revenue growth assumption: revenue is modeled to decline slightly, by about 0.07% a year

• Assumes flat to slightly weaker revenue as aging blockbuster drugs face patent pressure, biosimilar competition and tighter pricing from payors and governments.
• Builds in modest margin compression and a future P/E of 21.7x, with a fair value that lines up with the more cautious end of analyst targets.
• Accepts that Amgen has a solid pipeline and secular healthcare demand, but treats integration risk, higher costs and clinical uncertainty as reasons to apply a lower valuation.

If you want to see how the rest of the Community is framing these trade offs and where you sit between the bullish and bearish cases, See what the community is saying about Amgen.

Do you think there's more to the story for Amgen? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.