Last update on 2024-06-04

Amgen (AMGN) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Analyze Amgen's (AMGN) financial health for 2023 using the Piotroski F-Score. Discover profitability, liquidity, and efficiency details in this stock report.

Short Analysis - Piotroski Score: 5

We're running Amgen (AMGN) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score for Amgen (AMGN) evaluates the financial strength of the company based on 9 criteria related to profitability, liquidity, and operational efficiency. Here's a brief overview of Amgen's performance: 1. Profitability: - Positive Net Income: Amgen's net income for 2023 is $6.717 billion, earning 1 point. - Positive Cash Flow: CFO for 2023 is $8.471 billion, earning another point. - ROA Decline: ROA decreased from 0.1038 in 2022 to 0.0828 in 2023, scoring 0 points. - Operating Cash Flow > Net Income: Operating cash flow exceeds net income, added 1 point. 2. Liquidity: - Leverage Increase: Leverage ratio increased from 0.5736 in 2022 to 0.6502 in 2023, earning 0 points. - Current Ratio Increase: Current ratio improved from 1.4143 in 2022 to 1.6492 in 2023, earning 1 point. - Reduction in Shares: Outstanding shares decreased from 538 million in 2022 to 535 million in 2023, earning another point. 3. Operational Efficiency: - Gross Margin Decline: Gross margin fell from 0.7566 in 2022 to 0.7002 in 2023, earning 0 points. - Asset Turnover Decline: Asset turnover ratio declined, resulting in 0 points. Amgen scores 5 out of 9, reflecting mixed financial health with strong cash flow and some concerns in efficiency and leverage.

Insights for Value Investors Seeking Stable Income

Amgen's Piotroski F-Score of 5 suggests a moderate financial position. While the company showcases strong cash generation and liquidity, there are areas of concern such as declining ROA, gross margin, and increasing leverage. Investors may want to look into the reasons behind these declines and balance them with the company's strong aspects like consistent profitability and share buybacks. Overall, Amgen could be a decent investment, but it warrants further investigation to understand potential risks and growth prospects.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Amgen (AMGN)

Company has a positive net income?

The Net Income criterion assesses whether the company has a positive net income for the current year. A positive net income indicates profitability and adds 1 point.

For Amgen (AMGN), the net income for 2023 is $6,717,000,000, which is positive. Hence, according to the Piotroski Analysis, this adds 1 point to Amgen's F-Score. Analyzing the historical net income over the past 20 years, Amgen has consistently reported positive net income figures. The net income has shown a generally upward trend, despite some fluctuations. The recent figure of $6.717 billion indicates a continuation of this positive trend, and signifies solid financial health for Amgen. Notably, the last three years (2021: $6.552 billion, 2022: $6.717 billion, and 2023: $6.717 billion) reflect a stabilization in earnings, providing confidence in Amgen's ongoing profitability.

Company has a positive cash flow?

Cash Flow from Operations (CFO) is crucial as it provides insights into the cash a company generates from its core business activities, highlighting the firm’s ability to generate cash to maintain and grow operations.

For Amgen (AMGN), the Cash Flow from Operations (CFO) in 2023 is reported at $8,471,000,000, which is a positive figure. Given the positive cash flow, this criterion earns 1 point. Over the last 20 years, Amgen has consistently generated positive operational cash flows, with figures oscillating from $3.57 billion in 2003 to a peak of $11.30 billion in 2018. Although there's a decline from the 2022 value of $9.72 billion, the substantial operational cash flow above $8 billion still showcases Amgen's strong operational efficiency and its ability to generate substantial cash from its core activities.

Return on Assets (ROA) are growing?

The change in Return on Assets (ROA) suggests how efficiently a company is utilizing its assets to generate earnings. It is crucial for assessing management effectiveness and overall company performance.

Amgen's ROA decreased from 0.1038 in 2022 to 0.0828 in 2023. This decline indicates a reduced efficiency in generating earnings from its assets. Over the last 20 years, Amgen's ROA has seen increased fluctuations, peaking at a maximum of 0.1129 and a minimum of 0.0513. While the industry's median ROA has remained relatively stable around 0.724, Amgen must address operational inefficiencies and cost structure to improve its ROA. This year's ROA trend would result in a score of 0 for the Piotroski analysis, suggesting caution for investors.

Operating Cashflow are higher than Netincome?

Criterion: Operating Cash Flow being higher than Net Income. This is a sign of high-quality earnings, as it indicates that a company is generating sufficient cash from its core business operations to cover its reported net income. This reduces dependence on external financing and is a strong indicator of financial health.

For the fiscal year 2023, Amgen's operating cash flow was $8,471 million, while its net income was $6,717 million. Since the operating cash flow exceeds the net income, this criterion adds a point to Amgen's Piotroski Score. Historically, over the last 20 years, Amgen has consistently had a strong operating cash flow, reinforcing its reputation for robust financial operations. Notably, the cash flow exhibited a significant upward trend from 2014 to 2016, peaking at $11,296 million in 2018 before seeing some variability in the following years. By comparison, net income has shown a steadier though less pronounced increase, with exceptional growth stints like in 2015 and 2016. The margin between operating cash flow and net income narrowed considerably in 2023, which could be attributed to strategic investments or changes in operational efficiency. Nonetheless, the sustained positive trend underscores solid financial management, enhancing investor confidence.

Liquidity of Amgen (AMGN)

Leverage is declining?

Leverage measures a company's debt level relative to its equity and impacts financial stability.

Comparing the leverage ratio of 0.5736 in 2022 to 0.6502 in 2023 for Amgen (AMGN), there's a clear increase in the company's debt level relative to its equity. This upward trend in leverage might indicate growing dependence on debt financing, which could either support growth or heighten financial risk. Historically, the leverage ratio has shown a predominantly gradual increase over the past 20 years, from 0.1176 in 2003 to 0.6502 in 2023, suggesting increasing financial obligations and potential risk exposure. Therefore, no point is awarded for this criterion.

Current Ratio is growing?

The Current Ratio measures a company's ability to pay its short-term obligations with its short-term assets. A higher ratio implies better liquidity.

The Current Ratio for Amgen (AMGN) has increased from 1.4143 in 2022 to 1.6492 in 2023, adding a point in the Piotroski Scorecard. The upward movement indicates improved liquidity. Comparing to the industry median, Amgen's current ratio continues to outperform the median of 1.2749 in 2023, demonstrating a favorable liquidity position against its peers. Over the past 20 years, Amgen's current ratio has fluctuated, peaking in earlier years and then stabilizing around 1.5 in recent times. This trend is undoubtedly positive as it showcases the company's consistency and financial health in managing its short-term liabilities and assets.

Number of shares not diluted?

Change in shares outstanding is crucial because it impacts an investor's ownership stake and a company's earnings per share (EPS). A decrease generally implies share buybacks.

Upon analyzing the outstanding shares, Amgen had 538,000,000 shares in 2022 and 535,000,000 shares in 2023. This indicates a decrease in outstanding shares by 3,000,000. Historically, over the last two decades, Amgen has shown a consistent trend of reducing its shares outstanding from a high of 1,346,000,000 in 2003 to the current 535,000,000 in 2023. This long-term reduction signifies strong share buyback programs, which generally is a positive signal for investors as it can lead to an increase in EPS. For this criterion, Amgen earns 1 point.

Operating of Amgen (AMGN)

Cross Margin is growing?

Gross margin measures the percentage of revenue that exceeds the cost of goods sold (COGS). It is a crucial indicator of a company's operational efficiency, pricing strategy, and overall financial health. A company's gross margin can significantly impact its profitability and ability to reinvest in the business.

Amgen's gross margin has decreased from 0.7566 in 2022 to 0.7002 in 2023. This decline suggests potential issues with operational efficiency or increased costs that were not offset by higher revenue. With the industry median gross margin at 0.7176 in 2023, Amgen's performance is slightly below the industry standard. This decline sets Amgen's Piotroski score for this criterion to 0, indicating a less favorable financial position in terms of gross margin performance.

Asset Turnover Ratio is growing?

This criterion examines the change in Asset Turnover ratio from one year to the next. The Asset Turnover ratio measures a company's ability to generate sales from its assets. It is calculated by dividing the company's total sales by its total assets. A higher ratio indicates that the company is using its assets more efficiently to generate revenue.

The Asset Turnover ratio for Amgen in 2023 is 0.3474, down from 0.4169 in 2022. This signifies a decrease, which means the company was less efficient in generating revenue from its assets in 2023 compared to the previous year. The decrease in the Asset Turnover ratio could be attributed to either a decline in sales or an increase in total assets without a proportional increase in revenue. Therefore, according to the Piotroski Analyses rules, Amgen scores 0 points for this criterion. Looking at a broader timespan, the ratio shows fluctuations but reveals a general decrease over the past two decades, with peaks in 2006 (0.4523) and drops in 2013 (0.2969) and in 2023 (0.3474). This long-term declining trend may raise concerns about the efficiency of asset utilization over time.