Comparison of Performance at Amgen and Its Competitors
Using financial ratios, Amgen was compared to its central competitors, AstraZeneca and Pfizer, in terms of profitability, liquidity, financial leverage, and efficiency. Cross profit margin and net profit margin demonstrated that Amgen’s profitability was higher than that of its competitors. Current and quick ratios demonstrated that the company’s liquidity was high.
However, Amgen had the lowest performance in terms of leverage among its peers, as demonstrated by debt-to-assets and times interest earned ratios. Moreover, Amgen had the lowest performance in FY2022 regarding asset and inventory turnover ratios, demonstrating low efficiency. The analysis of total returns demonstrated that Amgen had the second-best performance after AstraZeneca, with 57.12% in five-year total returns, while AstraZeneca’s total return was 138.1%, and Pfizer’s return was 33.41%. However, Amgen’s performance was below the 65.86% mark of the S&P 500.
Central Challenges
The analysis of the company’s financial performance demonstrated that the central challenges the company faces include high financial leverage, low asset use efficiency, and low stock returns. It should also be mentioned that the company’s stock prices fell significantly, which was influenced by some critical events. First, the sales of COVID-19 antibodies affected the company’s revenues. As a result, in the first quarter of 2023, the adjusted earnings per share fell from $4.25 to $3.98, negatively affecting the investors’ attitudes towards the company.
The analysis’s results demonstrated that Amgen’s financial performance is stable, as the company has high profitability and liquidity. However, the attractiveness of shares was below average, as returns on the company’s shares were below the S&P 500. Additionally, external factors, such as instability of exchange rates and imitation, had a significantly high impact on the company.
Recommendations and Conclusion
Amgen is recommended to increase the effectiveness of stock use, as the current use of assets is below that of its competitors, which may hurt the attractiveness of the company’s shares. Since the company’s revenues from COVID-19 antibodies are falling, it is also recommended to search for alternative sources of revenue to compensate for the revenue loss. Additionally, the analysis demonstrated that most of the company’s assets are financed with debt, which may lead to increased investment risks. Therefore, it is recommended that the company create a long-term strategy for reducing long-term debt.
References
Amgen. (2023). Annual report 2022. Web.
Yahoo Finance. (2023a). Amgen Inc. Web.
Yahoo Finance. (2023b). AstraZeneca Inc. Web.
Yahoo Finance. (2023c). Pfizer Inc. Web.