Figuring out whether Amgen stock is overvalued is less about gut feeling and more about math. It requires stacking the company's valuation multiples against both its large-cap biotech peers and its own historical norms. Metrics like price-to-earnings, price-to-sales, and PEG ratios each tell a different part of the story, and only by comparing them across multiple dimensions can investors form a grounded view of whether AMGN's current price tag makes sense or looks stretched.
Key takeaways
- No single valuation metric answers whether Amgen is overvalued; P/E, P/S, and PEG ratios each capture different aspects of the company's financial profile.
- Comparing AMGN valuation to peers like Gilead and Regeneron reveals where the stock sits in the large-cap biotech pecking order.
- Checking today's multiples against Amgen's own 5-year historical averages shows whether the market is paying a premium or discount relative to what it has typically paid.
- Pipeline optionality, margin stability, and revenue growth trajectory can justify a higher multiple, but only up to a point.
- Investors can run this type of peer-and-historical comparison themselves using AI-driven research tools rather than relying on headline opinions.
Why valuation multiples matter when evaluating Amgen
Valuation multiples are shorthand. They compress a company's entire financial profile into a ratio you can compare across stocks and time periods. For a company like Amgen, which operates in the large-cap biotech space with a mix of mature revenue streams and pipeline bets, no single ratio gives you the full picture. That's why investors typically look at several together.
The three most common for this kind of analysis are price-to-earnings (P/E), price-to-sales (P/S), and the PEG ratio. Each has strengths and blind spots, and understanding those trade-offs is what separates a useful valuation analysis from a superficial one.
Price-to-Earnings (P/E) Ratio: A stock's price divided by its earnings per share. It tells you how much investors are willing to pay for each dollar of profit. Higher P/E can mean higher growth expectations, or it can mean the stock is expensive relative to what it earns.
Price-to-Sales (P/S) Ratio: A stock's price divided by its revenue per share. Useful when earnings are volatile or when comparing companies with different cost structures. It strips out margin differences and focuses purely on how the market values each dollar of revenue.
PEG Ratio: The P/E ratio divided by the company's expected earnings growth rate. A PEG of 1.0 is often considered "fair," meaning you're paying proportionally for the growth you're getting. Below 1.0 can suggest undervaluation; above 1.0, the opposite. But the growth estimate you use matters enormously.
Is AMGN expensive compared to Gilead and Regeneron?
Peer comparison is where the real signal lives. Amgen, Gilead Sciences, and Regeneron Pharmaceuticals are all large-cap biotech companies, but they have meaningfully different business profiles. Gilead leans heavily on its HIV and hepatitis franchises with relatively stable but slower-growing revenue. Regeneron is more growth-oriented, with Dupixent driving significant top-line expansion. Amgen sits somewhere in between: a diversified portfolio with both legacy products and newer launches like Tezspire and biosimilars.
Here's the framework to think through. When Amgen's P/E is higher than Gilead's, ask whether Amgen's earnings growth rate justifies the premium. If Amgen's P/S is lower than Regeneron's, consider whether that reflects Amgen's larger revenue base or lower growth expectations. The PEG ratio helps normalize these comparisons, but only if you trust the growth estimates you're plugging in.
Large-cap biotech P/E ratios typically range from about 10 to 25, depending on the company's growth profile and patent exposure. P/S ratios for the group generally fall between 3 and 8. If AMGN's multiples sit at the higher end of those ranges while its growth rate sits at the lower end, that's a signal worth investigating further. The reverse would suggest the stock might be reasonably priced or even undervalued.
You can pull up the Amgen research page on Rallies.ai to see how these metrics compare in real time without having to dig through multiple financial databases.
How does Amgen's valuation compare to its own 5-year history?
Peer comparison tells you where Amgen sits relative to other companies. Historical comparison tells you where it sits relative to itself. Both matter, and they sometimes tell different stories.
Over any given 5-year stretch, Amgen's P/E ratio has fluctuated as earnings have grown, contracted, or been affected by one-time charges. If the stock's P/E is meaningfully above its 5-year average, the market is either pricing in faster future growth or paying a premium that may not be sustainable. If it's below the average, investors might be discounting the stock due to concerns about patent cliffs, competition, or slowing growth.
The same logic applies to P/S. Amgen's revenue mix has shifted over time as biosimilar competition has eaten into some legacy products while newer drugs have ramped. A rising P/S ratio without corresponding revenue acceleration could indicate the stock is getting expensive. A falling P/S alongside stable or growing revenue might suggest it's getting cheaper.
Here's the thing about historical averages, though: they're not magic numbers. An average can be skewed by outlier periods. If Amgen traded at an unusually low P/E for two of those five years due to temporary headwinds, the average gets dragged down, making today's multiple look inflated even if it's perfectly normal.
The better approach is to look at both the median and the range, not just the mean. If the stock's P/E has historically traded between 12 and 18, and it's now at 19, that's mild elevation. If it's at 25, that's a different conversation.
What would make Amgen's valuation look justified?
A stock can look expensive on simple metrics and still be fairly priced once you account for the right context. For Amgen, several factors could justify a premium to its historical averages or its peers:
- Accelerating revenue growth: If newer products are growing fast enough to offset biosimilar erosion and legacy product declines, a higher P/S ratio makes sense. Investors pay up for durable top-line momentum.
- Margin expansion: If Amgen is becoming more profitable per dollar of revenue through cost discipline or a shifting product mix toward higher-margin drugs, then a higher P/E can be warranted even without dramatic revenue growth.
- Pipeline optionality: Amgen's pipeline includes obesity candidates and other high-potential programs. The market often prices in pipeline value before it shows up in earnings. This is legitimate but speculative, and it's where investors need to be honest about how much they're paying for hope versus results.
- Debt reduction trajectory: After acquiring Horizon Therapeutics, Amgen's debt load increased significantly. A credible path to deleveraging can support the stock's multiple because it reduces financial risk over time.
- Dividend consistency: Amgen has a long track record of returning capital to shareholders. A reliable and growing dividend can support a slightly higher valuation because income-focused investors anchor to yield rather than pure earnings multiples.
If none of these factors are working in Amgen's favor at any given time, then an elevated multiple has less justification. That's the honest framework.
When would AMGN valuation look too expensive?
The flip side is just as important. A stock can be a great company and still be a poor investment at the wrong price. Here are the conditions that would make Amgen's valuation harder to defend:
- Slowing growth with a rising P/E: If earnings growth decelerates but the stock price holds or rises, the P/E inflates for the wrong reasons. That divergence is a red flag.
- PEG ratio well above 1.5: At some point, you're paying too much for the growth you're getting. A PEG above 1.5, using consensus forward growth estimates, suggests the market is pricing in a very optimistic scenario.
- P/S above the peer median with below-median revenue growth: If Amgen's P/S exceeds Gilead's and Regeneron's while its revenue growth trails theirs, the premium is hard to justify on fundamentals alone.
- Historical multiple at the top of the range: If the stock is trading at the highest P/E it's seen in the last five years and there's no clear catalyst to push earnings higher, the risk-reward skews unfavorably.
None of these conditions in isolation mean the stock is guaranteed to decline. But they're the inputs that, taken together, build the case that the stock might be priced for perfection in a business where perfection is rare.
How to build your own Amgen fair value framework
Rather than relying on someone else's opinion about whether Amgen is overvalued, you can build a simple framework yourself. It doesn't require a finance degree. It requires consistency and honest assumptions.
- Gather the data: Look up Amgen's trailing P/E, forward P/E, P/S, and PEG ratio. Do the same for Gilead and Regeneron. You can find this on the Rallies.ai Vibe Screener or any major financial data provider.
- Calculate 5-year averages: For each metric, find Amgen's average over the past five years. Note the high and low ends of the range, not just the average.
- Compare horizontally (peers): Where does Amgen sit versus Gilead and Regeneron on each metric? Is it consistently higher, lower, or mixed?
- Compare vertically (history): Where does Amgen sit versus its own history on each metric? Above average? Below? At the extremes?
- Contextualize the gaps: For any metric where Amgen looks elevated versus peers or history, ask why. Is there a fundamental reason (growth, margins, pipeline) or is it just market sentiment?
- Stress test your assumptions: What happens to your view if growth comes in lower than expected? What if a pipeline candidate fails? Build in some margin of safety.
This process takes maybe 30 minutes, and it gives you a much more grounded perspective than any headline claiming the stock is "cheap" or "expensive." If you want to speed up the research, tools like the Rallies AI Research Assistant can pull and compare these metrics for you in seconds.
Common mistakes when assessing whether a stock is overvalued
A few pitfalls show up repeatedly when investors try to answer the "is it overvalued" question:
- Using only trailing P/E: Trailing earnings reflect the past. Forward P/E, while imperfect, at least attempts to price in what's coming. Use both, but weigh forward estimates more heavily for a company with a shifting product mix like Amgen.
- Ignoring the denominator: A high P/E can result from a high stock price or from temporarily depressed earnings. If earnings are low because of a one-time charge, the P/E looks inflated even though the underlying business is fine. Always check what's driving the ratio.
- Comparing across different industries: Biotech multiples are not the same as consumer staples or tech multiples. Amgen should be compared to other large-cap biotech and pharmaceutical companies, not to the S&P 500 average, which is heavily weighted toward tech.
- Anchoring to a single data point: "Amgen's P/E is 17 and Gilead's is 13, so Amgen is overvalued." That's incomplete. Maybe Amgen's growth rate is twice Gilead's. Maybe its margins are higher. One ratio without context misleads more than it informs.
For a broader look at how financial metrics work together in stock analysis, it helps to study multiple frameworks rather than relying on a single number.
Try it yourself
Want to run this kind of analysis on your own? Copy any of these prompts and paste them into the Rallies AI Research Assistant:
- Compare Amgen's valuation metrics to other large-cap biotech companies — how do their P/E, price-to-sales, and PEG ratios stack up against peers like Gilead and Regeneron, and how does that compare to Amgen's own 5-year historical averages? What would make their current valuation look justified versus expensive?
- Is Amgen stock expensive? Compare its P/E, price-to-sales, and forward estimates to the rest of its industry.
- What is Amgen's PEG ratio versus its biotech peer group, and how has it changed over the past five years?
Frequently asked questions
Is Amgen stock overvalued right now?
Whether Amgen is overvalued depends on which metrics you use and what you compare them to. If AMGN's P/E and P/S ratios sit above both its peer group and its own 5-year averages without a clear fundamental driver like accelerating growth, there's a reasonable case for overvaluation. If those premiums are backed by pipeline progress or margin expansion, the picture shifts. The answer changes with the data, which is why it's worth running the comparison yourself rather than accepting a blanket verdict.
What is a good P/E ratio for AMGN?
There's no universal "good" P/E for any stock. For Amgen, the most useful benchmark is its own 5-year historical range alongside the P/E ratios of comparable large-cap biotech companies. If AMGN's P/E falls within or below that historical range and is in line with peers like Gilead or Regeneron after adjusting for growth, most valuation frameworks would consider it reasonable.
How do you determine Amgen fair value?
One approach is a multiples-based framework: compare Amgen's P/E, P/S, and PEG ratios to its peers and its own history, then assess whether any deviations are justified by fundamentals. Another approach is discounted cash flow analysis, which estimates the present value of Amgen's future cash flows. Both methods require assumptions about growth, margins, and risk, so the "fair value" is always a range, not a single number.
Is AMGN expensive compared to Gilead?
Amgen and Gilead have different growth profiles, which complicates direct comparison. Gilead tends to trade at a lower P/E due to its more mature revenue base and slower growth. If Amgen's P/E is higher, the question is whether Amgen's faster expected growth justifies the premium. The PEG ratio helps normalize this comparison by accounting for the growth differential.
What does a PEG ratio above 1 mean for Amgen?
A PEG ratio above 1.0 means investors are paying more than a dollar in P/E for each percentage point of expected earnings growth. It doesn't automatically mean the stock is overvalued, but it does mean the market is pricing in a relatively optimistic growth scenario. For Amgen, a PEG significantly above its historical norm or above its peer group average would be a signal worth investigating further.
Where can I compare AMGN valuation metrics to peers?
Financial data platforms and stock research tools provide side-by-side comparisons of P/E, P/S, and PEG ratios across companies. The Rallies.ai Research Assistant lets you ask plain-language questions like "compare Amgen's valuation to Gilead and Regeneron" and get structured answers. You can also use stock screeners to filter biotech companies by valuation ranges.
Does Amgen's dividend affect its valuation?
Yes, indirectly. Amgen's consistent dividend attracts income-oriented investors who may accept a slightly higher P/E in exchange for reliable cash returns. Dividend yield and payout ratio are separate metrics from P/E and P/S, but they influence how investors perceive the stock's value. A company with a growing dividend and stable payout ratio often commands a small valuation premium within its peer group.
Bottom line
Answering whether Amgen stock is overvalued is a process, not a soundbite. It requires comparing P/E, P/S, and PEG ratios against both biotech peers and AMGN's own 5-year history, then asking whether any premiums or discounts have a fundamental explanation. No single metric gives you the answer; the signal comes from the pattern across all of them.
If you want to build this kind of analysis into your own investment research workflow, start with the frameworks above and explore more valuation tools on the Rallies.ai financial metrics resource page.
Disclaimer: This article is for educational and informational purposes only. It does not constitute investment advice, financial advice, trading advice, or any other type of advice. Rallies.ai does not recommend that any security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. All investments involve risk, including the possible loss of principal. Past performance does not guarantee future results. Before making any investment decision, consult with a qualified financial advisor and conduct your own research.
Written by Gav Blaxberg, CEO of WOLF Financial and Co-Founder of Rallies.ai.
