Here’s Why Intuit Stock Is A Better Pick Over Amgen

AMGN: Amgen logo
AMGN
Amgen

Given its better prospects, we believe Intuit stock (NASDAQ: INTU), a financial software company, is a better pick than Amgen stock (NASDAQ: AMGN). Although these companies are from different sectors, we compare them because they have a similar market capitalization of around $144 billion, and both are part of the broader NASDAQ 100 index. The decision to invest often comes down to finding the best stocks within the parameters of certain characteristics that suit an investment style. The size of profits can matter, as larger profits can imply greater market power. Since these stocks are from different sectors, comparing P/S against one another may not be helpful. We compare their current multiples with the historical ones in the sections below to better gauge their valuations.

Interestingly, INTU stock has had a Sharpe Ratio of 0.9 since early 2017, higher than 0.4 for AMGN and 0.5 for the S&P 500 Index over the same period. This compares with the Sharpe of 1.2 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.

Looking at stock returns, INTU has fared better. While AMGN is up 2% this year, INTU has surged 31%, and the S&P500 index is up 12%. The rise in INTU stock over the recent quarters can be attributed to its consistent upbeat earnings. There is more to the comparison, and in the sections below, we discuss why we believe INTU will offer better returns than AMGN in the next three years. We compare a slew of factors, such as historical revenue growth, returns, and valuation, in an interactive dashboard analysis of Amgen vs. IntuitWhich Stock Is A Better Bet? Parts of the analysis are summarized below.

Relevant Articles
  1. Charles Schwab Stock Is Trailing S&P500 By 8% YTD, What To Expect From Q2 Results?
  2. Will Cost Cuts and User Gains Power Roku’s Q2 Results
  3. Here’s What To Expect From UnitedHealth’s Q2
  4. Intercontinental Exchange Stock Gained 15% YTD, What’s Next?
  5. Can PVH Stock Rise 13% To Its Pre-Inflation Shock Highs?
  6. What Led To A 150% Rise In uniQure Stock In A Week?

1. Intuit’s Revenue Growth Is Better

  • Intuit’s revenue growth has been better, with a 23.6% average annual growth rate in the last three years, compared to 4.1% for Amgen.
  • Amgen’s expansion of some of its drugs, including Prolia, Otezla, Tezspire, and Repatha, is driving its revenue growth, while some of the older drugs, such as Enbrel and Neulasta, are seeing a y-o-y decline in sales.
  • For Intuit, the strong revenue growth over the recent past can be attributed to a 2x rise in the total customer base from 50 million in 2019 to 100 million now.
  • There has been a rise in people and small businesses opting to file tax returns using software, and this trend is expected to continue in the near term.
  • Furthermore, in 2021, the company acquired Credit Karma and Mailchimp, which has bolstered Intuit’s top-line growth.
  • Credit Karma offers personalized recommendations of credit card, home, auto, personal loans, and insurance products, among others, to its customers. It generates revenue from cost-per-action transactions related to credit card issuances and private loan funding.
  • If we look at the last twelve-month period revenues, Intuit has fared better with 9.3% sales growth, while Amgen saw its revenue rise by 0.8%.
  • Our Amgen Revenue Comparison and Intuit Revenue Comparison dashboards provide more insight into the companies’ sales.
  • Looking forward, Intuit’s revenue is expected to grow at a low double-digit average annual rate to $19 billion in three years. In comparison, Amgen’s revenue will likely rise at a low single-digit average annual rate to $28 billion, based on Trefis Machine Learning analysis.

2. Amgen Is More Profitable

  • Amgen’s operating margin has contracted from 45% in 2019 to 33% in 2022, while Intuit’s operating margin declined from 27% to 20% over this period.
  • Also, looking at the last twelve-month period, Amgen’s operating margin of 36% fares better than 22% for Intuit.
  • Our Amgen Operating Income Comparison and Intuit Operating Income Comparison dashboards have more details.
  • Looking at financial risk, both are comparable. While Amgen’s 43% debt as a percentage of equity is higher than 5% for Intuit, its 38% cash as a percentage of assets is higher than 13% for the latter, implying that Intuit has a better debt position, but Amgen has more cash cushion.

3. The Net of It All

  • We see that Intuit has demonstrated better revenue growth and has a better debt position. On the other hand, Amgen is more profitable and has more cash cushion.
  • Now, looking at prospects, using P/S as a base, due to high fluctuations in P/E and P/EBIT, we believe Intuit is a better pick.
  • The table below summarizes our revenue and return expectations for both companies over the next three years and points to an expected return of 37% for Intuit over this period vs. a -1% expected return for Amgen, based on Trefis Machine Learning analysis – Amgen vs. Intuit– which also provides more details on how we arrive at these numbers.
  • Note that Amgen has a few drugs nearing patent expiry, while some drugs face increased competition. For perspective, Enbrel – the rheumatoid arthritis and plaque psoriasis drug – is Amgen’s top-selling product. However, the company has seen the drug’s sales fall to $4.1 billion in 2022, compared to $5.4 billion in 2017. Although Enbrel’s market exclusivity is still far out (2029), it faces increased competition from other companies’ drugs, including AbbVie’s Rinvoq, Pfizer’s Zeljanz, and Johnson & Johnson’s Stelara.
  • Even if we compare the current valuation multiple to the historical average, Intuit fares much better. Intuit stock trades at 10.2x revenues, compared to its last five-year average of 12.2x, while Amgen stock trades at 5.4x trailing revenues vs. the last five-year average of 5.1x.
  • Our Amgen (AMGN) Valuation Ratios Comparison and Intuit (INTU) Valuation Ratios Comparison have more details.

While INTU may outperform AMGN in the next three years, it is helpful to see how Intuit’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Returns Oct 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 AMGN Return 0% 2% 84%
 INTU Return 0% 31% 346%
 S&P 500 Return 0% 12% 92%
 Trefis Reinforced Value Portfolio 0% 23% 533%

[1] Month-to-date and year-to-date as of 10/2/2023
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates