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Microsoft Excel LibreOffice Calc

Amgen Inc. (AMGN)


Present Value of Free Cash Flow to Equity (FCFE)

Medium level of difficulty


Intrinsic Stock Value (Valuation Summary)

Amgen Inc., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

Microsoft Excel LibreOffice Calc
Year Value FCFEt or Terminal value (TVt) Calculation Present value at hidden
01 FCFE0 hidden
1 FCFE1 hidden = hidden × (1 + hidden) hidden
2 FCFE2 hidden = hidden × (1 + hidden) hidden
3 FCFE3 hidden = hidden × (1 + hidden) hidden
4 FCFE4 hidden = hidden × (1 + hidden) hidden
5 FCFE5 hidden = hidden × (1 + hidden) hidden
5 Terminal value (TV5) hidden = hidden × (1 + hidden) ÷ (hiddenhidden) hidden
Intrinsic value of Amgen Inc.’s common stock hidden
 
Intrinsic value of Amgen Inc.’s common stock (per share) $hidden
Current share price $hidden

Based on: 10-K (filing date: 2019-02-13).

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

Microsoft Excel LibreOffice Calc
Assumptions
Rate of return on LT Treasury Composite1 RF hidden
Expected rate of return on market portfolio2 E(RM) hidden
Systematic risk of Amgen Inc.’s common stock βAMGN hidden
 
Required rate of return on Amgen Inc.’s common stock3 rAMGN hidden

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rAMGN = RF + βAMGN [E(RM) – RF]
= hidden + hidden [hiddenhidden]
= hidden


FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Amgen Inc., PRAT model

Microsoft Excel LibreOffice Calc
Average Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (US$ in millions)
Dividends declared on common stock hidden hidden hidden hidden hidden
Net income hidden hidden hidden hidden hidden
Product sales hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden
Stockholders’ equity hidden hidden hidden hidden hidden
Financial Ratios
Retention rate1 hidden hidden hidden hidden hidden
Profit margin2 hidden hidden hidden hidden hidden
Asset turnover3 hidden hidden hidden hidden hidden
Financial leverage4 hidden hidden hidden hidden hidden
Averages
Retention rate hidden
Profit margin hidden
Asset turnover hidden
Financial leverage hidden
 
FCFE growth rate (g)5 hidden

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-19).

2018 Calculations

1 Retention rate = (Net income – Dividends declared on common stock) ÷ Net income
= (hiddenhidden) ÷ hidden = hidden

2 Profit margin = 100 × Net income ÷ Product sales
= 100 × hidden ÷ hidden = hidden

3 Asset turnover = Product sales ÷ Total assets
= hidden ÷ hidden = hidden

4 Financial leverage = Total assets ÷ Stockholders’ equity
= hidden ÷ hidden = hidden

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= hidden × hidden × hidden × hidden = hidden


FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (hidden × hiddenhidden) ÷ (hidden + hidden) = hidden

where:
Equity market value0 = current market value of Amgen Inc.’s common stock (US$ in millions)
FCFE0 = the last year Amgen Inc.’s free cash flow to equity (US$ in millions)
r = required rate of return on Amgen Inc.’s common stock


FCFE growth rate (g) forecast

Amgen Inc., H-model

Microsoft Excel LibreOffice Calc
Year Value gt
1 g1 hidden
2 g2 hidden
3 g3 hidden
4 g4 hidden
5 and thereafter g5 hidden

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= hidden + (hiddenhidden) × (2 – 1) ÷ (5 – 1) = hidden

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= hidden + (hiddenhidden) × (3 – 1) ÷ (5 – 1) = hidden

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= hidden + (hiddenhidden) × (4 – 1) ÷ (5 – 1) = hidden