Is Now A Good Time To Buy Amgen?

Amgen stock is outperforming both SPDR S&P 500 (SPY) and iShares Nasdaq Biotechnology (IBB) on a year to date basis. In comparison to both the broad market and the biotech sector, Amgen stock is displaying vigorous relative strength.

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AMGN data by YCharts

Putting It All Together

The PowerFactors system is a quantitative investing system available to members in my research service, "The Data Driven Investor." This system basically ranks companies in a particular universe according to the factors analyzed in this article for Amgen: financial quality, valuation, earnings momentum, and relative strength.

The chart below divides the investable universe in 5 buckets based on their PowerFactors ranking, and it compares their historical performance versus the SPDR S&P 500. There is a clear and direct relationship between PowerFactors rankings and historical performance, this is to be expected when the quantitative system is robust and consistent. Also, companies with elevated quantitative rankings have substantially outperformed the market over the long term.

Data from S&P Global via Portfolio123

Amgen stock has a PowerFactors ranking of 99.25, and the company gets remarkably high scores across the four variables considered: quality, value, fundamental momentum, and relative strength. From a quantitative perspective, the numbers bode well for investors in Amgen going forward.

Past performance does not guarantee future returns, of course. A quantitative system is always based on past data and current expectations about future performance. If Amgen fails to deliver in accordance to those expectations, then the stock will most likely deliver disappointing returns going forward.

Investors may want to keep a close eye on the company's current and potential new products, and how they compare versus the offerings from the competition. Besides, regulatory risk and the always evolving pricing environment are always key variables to watch when investing in biotech stocks.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: I wrote this article myself, and it expresses my ...

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