Amgen vs. Merck: Which Dow Jones Stock Offers Better Value?

In the ever-evolving landscape of the healthcare sector, two giants stand out: Amgen and Merck. Both are part of the Dow Jones Industrial Average, and both have had markedly different performances in 2025. Amgen has seen a 21% year-to-date return, while Merck has lagged with an 8% decline. But which of these stocks offers better value for investors? Let's dive deep into the numbers and the narratives behind these two pharmaceutical powerhouses.



The P/E Ratio: A Starting Point

The price-to-earnings (P/E) ratio is a fundamental metric for assessing a company's valuation. Amgen trades at 15 times its projected earnings, while Merck sits at a forward P/E of 10. On the surface, this suggests that Merck is the cheaper stock. But the P/E ratio is just the beginning of the story.

Growth Prospects: Amgen's Edge

Amgen's higher P/E ratio might be justified by its stronger growth prospects. In 2024, Amgen's revenue increased by 19% year over year, significantly outpacing Merck's 7% annual change. Amgen's portfolio includes multiple best-in-class blockbusters, and there's growing anticipation for MariTide, its experimental obesity drug entering phase 3 trials. This drug could position Amgen to enter the GLP-1 weight loss and diabetes market, a sector with enormous potential.



Merck's Challenges

Merck, on the other hand, faces greater headwinds. Disappointing sales for its Gardasil vaccine against human papillomavirus (HPV) and uncertainty regarding the looming loss of patent exclusivity for its Keytruda cancer drug continue to weigh on its stock price. These challenges have led to a more cautious outlook for Merck, contributing to its stock decline.

Dividend Yields: Immediate vs. Future Returns

Merck offers a larger dividend yield of 3.4% compared to Amgen's 2.9%. This immediate income might be appealing to some investors, especially those looking for steady returns. However, Amgen's higher growth prospects and stronger financial performance could justify its higher valuation in the long run.

The Bottom Line

So, which stock offers better value? The answer depends on your investment horizon and risk tolerance. If you're looking for immediate income and are willing to accept slower growth, Merck might be the better choice. But if you're betting on future growth and are comfortable with a higher valuation, Amgen could be the way to go.

In the end, both Amgen and Merck have their strengths and weaknesses. The key is to understand these dynamics and make an informed decision based on your investment goals. As always, do your own research and consider consulting with a financial advisor before making any investment decisions.