Shares of Amgen (AMGN 2.37%) have been rising of late after a recent analyst upgrade generated some bullishness around the biotech company. Year to date, the stock is now up 12%, soundly outperforming the S&P 500, which has fallen 22% over the same period. 

What's all the excitement about? Should you buy the stock as it is climbing, or is Amgen's valuation due to fall back down? Let's take a look.

Analyst expectations are mixed

Morgan Stanley upgraded Amgen's stock last week, setting a price target of $279 for the company, noting that its weight-loss treatment, AMG 133, has been demonstrating positive results. That's about 20% higher than the $232 that Amgen's stock closed at the previous day. However, it's still in phase 1 trials and it's way too early to tell if the treatment may end up obtaining regulatory approval.

It's also important to remember that a stock's potential can look very different depending on whom you ask. For example, just a day later, Barclays set a more modest price target of only $234 for Amgen. Overall, there's a wide range of analyst price targets set for the healthcare stock. Some analysts even believe the stock could fall to $185 or lower.

Rather than relying solely on analyst expectations, it's worthwhile for investors to take a close look for themselves.

What the fundamentals say

Amgen's business centers around developing medication for areas where there is an unmet medical need. It utilizes advanced human genetics and other tools to help develop innovative therapeutics. Last year, its top-selling product was Enbrel, which posted sales of $4.5 billion. Enbrel is an injectable medication that treats rheumatoid arthritis and other conditions.

In the company's most recent quarter, ended June 30, overall sales were up a modest 1% year over year to $6.6 billion. Net income nearly tripled to $1.3 billion, but that was mainly due to a research and development expense of $1.5 billion that the company incurred last year (relating to its acquisition of Five Prime Therapeutics).

For the full year, the company anticipates that revenue will fall between $25.5 billion and $26.4 billion. That would be nearly identical to the revenue it posted in 2021, which was just under $26 billion.

The lack of growth may be concerning to investors, but that may not be a long-term issue. Last year, the Food and Drug Administration approved Lumakras, a lung cancer drug that has the potential to be a blockbuster, generating up to $1.4 billion in annual revenue as early as next year, according to analyst estimates. 

Another positive is that Amgen has generated free cash flow of $8.4 billion in the trailing 12 months. A company that is accumulating money won't run out of options for long-term growth opportunities. In addition to some exciting potential with Lumakras, the company's future in other areas also looks bright. Amgen currently has close to two-dozen phase 3 trials underway that could extend its growth potential even further.

Is Amgen a cheap buy?

Shares of Amgen currently trade at 21 times trailing earnings. That's in line with the average healthcare stock, which trades at 20 times profits. And compared to other top drugmakers, Amgen's valuation looks even more reasonable:

AMGN PE Ratio Chart

AMGN PE Ratio data by YCharts

The healthcare stock isn't trading near a low and it's not deeply discounted, but its value does appear to be fair and not overpriced.

Should you buy Amgen stock today?

Amgen's business looks strong with the company generating modest growth at a time when many businesses are struggling. And down the road, there's room for more growth potential. As a bonus, the stock also pays a dividend that yields 3.1%, which is better than the S&P 500 average of 1.8%.

Whether you're looking for a stock that has growth potential or a great yield, Amgen can make for a solid investment to consider adding to your portfolio today.