Wednesday, January 31, 2007
The dilemma - AMGN
Stick it out or dump it is the question......
I've been holding this stock for about a year now and I'm dead even. At this point it is the largest holding in my portfolio and I need to decide whether to hold on and hope for good things or dump it like the dog its acted like.
Here's the stats.
Last 5 years the company has grown at a 19.2% yoy rate.
Last year they earned 3.90/share, but diluted EPS ended up at 2.48 somehow. Looks like they took a big charge in the 2nd quarter, that's when the P/E jumped up on my Ameritrade chart.
Profit margin is 20.7% and operating margin is 35.8%, both strong.
They are projecting a growth rate of 13% this year or a full year EPS of $4.41.
A stock with a growth rate of 13% that has not missed an earnings estimate in a long time, their guidance is always conservative, in an industry that is growing should trade at a multiple above 20, more like 25-30. Going by their diluted EPS of $2.48 they are at an P/E of 28 right now, going by their actual earnings they are at a P/E of 18. Assuming they hit their earnings target of 4.41 at year's end then the stock should trade somewhere between a multiple of 18 and 28 or $80 and $125. If interest rates go up then multiples come down and I think you'll see interest rates go up again in late September. A realistic price for Dec. '07 is $85.
Other evidence.... http://www.thestreet.com/_yahoo/funds/madmoneywrap/10335542.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
(Page 2)
Should I hold or try and use my money elsewhere?
I've been holding this stock for about a year now and I'm dead even. At this point it is the largest holding in my portfolio and I need to decide whether to hold on and hope for good things or dump it like the dog its acted like.
Here's the stats.
Last 5 years the company has grown at a 19.2% yoy rate.
Last year they earned 3.90/share, but diluted EPS ended up at 2.48 somehow. Looks like they took a big charge in the 2nd quarter, that's when the P/E jumped up on my Ameritrade chart.
Profit margin is 20.7% and operating margin is 35.8%, both strong.
They are projecting a growth rate of 13% this year or a full year EPS of $4.41.
A stock with a growth rate of 13% that has not missed an earnings estimate in a long time, their guidance is always conservative, in an industry that is growing should trade at a multiple above 20, more like 25-30. Going by their diluted EPS of $2.48 they are at an P/E of 28 right now, going by their actual earnings they are at a P/E of 18. Assuming they hit their earnings target of 4.41 at year's end then the stock should trade somewhere between a multiple of 18 and 28 or $80 and $125. If interest rates go up then multiples come down and I think you'll see interest rates go up again in late September. A realistic price for Dec. '07 is $85.
Other evidence.... http://www.thestreet.com/_yahoo/funds/madmoneywrap/10335542.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
(Page 2)
Should I hold or try and use my money elsewhere?
