Amphastar Pharmaceuticals (AMPH)

Pharmaceutical company Amphastar Pharmaceuticals (NASDAQAMPH) missed Wall Street’s revenue expectations in Q4 CY2025, with sales falling 1.8% year on year to $183.1 million. Its non-GAAP profit of $0.73 per share was 20.5% below analysts’ consensus estimates.

Company Overview

Founded in 1996 and known for its expertise in complex drug formulations, Amphastar Pharmaceuticals (NASDAQ:AMPH) develops and manufactures technically challenging injectable and inhalation medications, including both generic and proprietary pharmaceutical products.

The generic pharmaceutical industry operates on a volume-driven, low-cost business model, producing bioequivalent versions of branded drugs once their patents expire. These companies benefit from consistent demand for affordable medications, as they are critical to reducing healthcare costs. Generics typically face lower R&D expenses and shorter regulatory approval timelines compared to branded drug makers, enabling cost efficiencies. However, the industry is highly competitive, with intense pricing pressures, thin margins, and frequent legal challenges from branded pharmaceutical companies over patent disputes. Looking ahead, the industry is supported by tailwinds such as the role of AI in streamlining drug development (reverse engineering complex formulations) and manufacturing efficiency (optimize processes and remove inefficiencies). Governments and insurers' focus on reducing drug costs can also boost generics' adoption. However, headwinds include escalating pricing pressure from large buyers like pharmacy chains and healthcare distributors as well as evolving regulatory hurdles.

Amphastar faces competition from pharmaceutical companies specializing in injectable and inhalation markets, including Pfizer (NYSE:PFE), Teva Pharmaceutical Industries (NYSE:TEVA), Viatris (NASDAQ:VTRS), Sandoz (NYSE:SDZ), Fresenius Kabi, and Hikma Pharmaceuticals (OTC:HKMPY). In the diabetes care space, particularly for insulin products, Amphastar competes with Novo Nordisk (NYSE:NVO) and Eli Lilly (NYSE:LLY).

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With just $719.9 million in revenue over the past 12 months, Amphastar Pharmaceuticals is a small company in an industry where scale matters. This makes it difficult to build trust with customers because healthcare is heavily regulated, complex, and resource-intensive.

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, Amphastar Pharmaceuticals’s 15.5% annualized revenue growth over the last five years was solid. Its growth beat the average healthcare company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. Amphastar Pharmaceuticals’s recent performance shows its demand has slowed as its annualized revenue growth of 5.4% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs.

This quarter, Amphastar Pharmaceuticals missed Wall Street’s estimates and reported a rather uninspiring 1.8% year-on-year revenue decline, generating $183.1 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 11.2% over the next 12 months, an improvement versus the last two years. This projection is noteworthy and implies its newer products and services will catalyze better top-line performance.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Amphastar Pharmaceuticals has been an efficient company over the last five years. It was one of the more profitable businesses in the healthcare sector, boasting an average operating margin of 24.5%.

Analyzing the trend in its profitability, Amphastar Pharmaceuticals’s operating margin rose by 6.7 percentage points over the last five years, as its sales growth gave it operating leverage. Zooming into its more recent performance, however, we can see the company’s margin has decreased by 7.7 percentage points on a two-year basis. If Amphastar Pharmaceuticals wants to pass our bar, it must prove it can expand its profitability consistently.

In Q4, Amphastar Pharmaceuticals generated an operating margin profit margin of 19.4%, down 4.8 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Amphastar Pharmaceuticals’s EPS grew at an astounding 38.4% compounded annual growth rate over the last five years, higher than its 15.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Amphastar Pharmaceuticals’s earnings to better understand the drivers of its performance. As we mentioned earlier, Amphastar Pharmaceuticals’s operating margin declined this quarter but expanded by 6.7 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q4, Amphastar Pharmaceuticals reported adjusted EPS of $0.73, down from $0.92 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects Amphastar Pharmaceuticals’s full-year EPS of $3.25 to grow 8.8%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Amphastar Pharmaceuticals has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 19.3% over the last five years, quite impressive for a healthcare business.

Taking a step back, we can see that Amphastar Pharmaceuticals’s margin expanded by 6.3 percentage points during that time. This is encouraging because it gives the company more optionality.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Amphastar Pharmaceuticals hasn’t been the highest-quality company lately, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 15.7%, impressive for a healthcare business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. On average, Amphastar Pharmaceuticals’s ROIC decreased by 3.9 percentage points annually each year over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

We struggled to find many positives in these results. Its revenue missed and its EPS fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 11.7% to $23.38 immediately after reporting.

Updated: February 26, 2026 at 5:27 PM EST

Before investing in or passing on Amphastar Pharmaceuticals, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Amphastar Pharmaceuticals’s business quality ultimately falls short of our standards. Although its revenue growth was solid over the last five years, it’s expected to deteriorate over the next 12 months and its subscale operations give it fewer distribution channels than its larger rivals. And while the company’s rising cash profitability gives it more optionality, the downside is its diminishing returns show management's prior bets haven't worked out.

Amphastar Pharmaceuticals’s P/E ratio based on the next 12 months is 7.5x. This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $31.57 on the company (compared to the current share price of $23.38).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.