Healthcare company Amgen (AMGN 1.19%) has been a reliable investment to own over what has been a turbulent year for the broader market. Its stock price is up 6.6% in that time, outpacing the 3.2% performance of the S&P 500 during that stretch. It also provides investors with an above-average dividend, which currently yields 3.3%. But while it has been a stable buy, does the stock have the potential to help make you a millionaire?
The biggest question mark is growth
For an investment to be millionaire-making, it needs to generate a good deal of growth. Investors are often captivated by growth stocks, after all, as they can rise quickly in value. And that's a potential concern for Amgen, as historically, the business struggled to generate much in the way of consistent sales growth.
AMGN Revenue (Quarterly YoY Growth) data by YCharts.
An average 5% growth rate isn't impressive, and what's worse is that Amgen's rate has been declining over the years. The company, however, has reason to be more bullish on its future: It's been looking to acquisitions to help improve its growth rate. Last year, it spent $4 billion to acquire ChemoCentryx and add potential blockbuster drug Tavneos, a treatment for anti-neutrophil cytoplasmic autoantibody-associated vasculitis, to its portfolio.
Amgen already has several blockbusters of its own. Rheumatoid arthritis drug Enbrel generated over $4.1 billion in revenue last year. Prolia, an osteoporosis medication, brought in $3.6 billion in sales. And psoriatic arthritis drug Otezla was the company's third-best product, with revenue of just under $2.3 billion for 2022.
This year, the company is trying to buy Horizon Therapeutics (HZNP +0.00%) for $27.8 billion. But the deal is still pending as regulators are pushing back, saying it could hurt competition (which Amgen denies). Horizon generates more than $3 billion in annual revenue and would strengthen Amgen's rare disease portfolio. A particularly promising drug involved in the deal is Tepezza, a treatment for thyroid eye disease which could bring in up to $4 billion in peak annual sales.
Amgen's growth rate could accelerate through these recent acquisitions (assuming the Horizon purchase goes through) and the development of its own pipeline, which features dozens of late-stage trials. But for now, the big drawback for growth-oriented investors is that the company doesn't have a huge catalyst coming that's sure to transform its business.
NASDAQ: AMGN
Key Data Points
Will Amgen be worth more than $5 trillion in 25 years?
Assuming you aren't prepared to invest a small fortune into a modestly growing drugmaker with an above-average dividend, you'd need a big return on an investment in Amgen for it to turn into $1 million. Even if you were to invest $25,000 in the healthcare company and hold it for 25 years, you would need the stock to grow to 40 times its valuation for your investment to be worth $1 million.
To put that into perspective, Amgen's market cap today is approximately $140 billion. At 40 times that valuation, it would need to be worth nearly $5.6 trillion. Right now, there aren't any healthcare stocks that are worth even $1 trillion. To get to that valuation, Amgen would need to rise at a compounded annual growth rate of roughly 16% for 25 years -- far higher than the S&P 500's long-run average of 10%.
By now it should be pretty clear that Amgen becoming a millionaire-making investment is a long shot based on where the business is today. While a lot can change in 25 years, the company doesn't have the track record, nor the growth opportunities, to suggest it can make you rich without you having to invest six figures in its stock.
Amgen can be a good dividend stock to buy, but don't expect miracles
Not every stock you invest in needs to be a potential 40-bagger. Amgen can certainly help pad your returns over the years and increase your portfolio's value. It can also add some stability during challenging economic conditions, as its products are essential for many patients. And it pays a great dividend that can be valuable, particularly if you want some recurring cash flow without needing to sell your stocks.
Amgen is a decently valued stock that trades at less than 18 times earnings (cheaper than the healthcare industry average of 27), and it provides a solid dividend. It can be a great long-term investment, but you shouldn't expect Amgen to generate life-changing returns for you.
