Amphastar Pharmaceuticals (AMPH)

Pharmaceutical company Amphastar Pharmaceuticals (NASDAQAMPH) reported Q3 CY2025 results beating Wall Street’s revenue expectations, but sales were flat year on year at $191.8 million. Its non-GAAP profit of $0.93 per share was 12.7% above 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 $723.3 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.

A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Amphastar Pharmaceuticals grew its sales at a solid 16.5% compounded annual growth rate. 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 annualized revenue growth of 9.7% over the last two years is below its five-year trend, but we still think the results were respectable.

This quarter, Amphastar Pharmaceuticals’s $191.8 million of revenue was flat year on year but beat Wall Street’s estimates by 4%.

Looking ahead, sell-side analysts expect revenue to grow 1.1% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will face some demand challenges.

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 23.3%.

Looking at the trend in its profitability, Amphastar Pharmaceuticals’s operating margin rose by 9 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 9.3 percentage points on a two-year basis. If Amphastar Pharmaceuticals wants to pass our bar, it must prove it can expand its profitability consistently.

This quarter, Amphastar Pharmaceuticals generated an operating margin profit margin of 13.2%, down 16.6 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Amphastar Pharmaceuticals’s EPS grew at an astounding 49.5% compounded annual growth rate over the last five years, higher than its 16.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of Amphastar Pharmaceuticals’s earnings can give us a better understanding of its performance. As we mentioned earlier, Amphastar Pharmaceuticals’s operating margin declined this quarter but expanded by 9 percentage points over the last five years. Its share count also shrank by 4.4%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

In Q3, Amphastar Pharmaceuticals reported adjusted EPS of $0.93, down from $0.96 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Amphastar Pharmaceuticals’s full-year EPS of $3.44 to shrink by 2.6%.

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 18.5% over the last five years, quite impressive for a healthcare business.

Taking a step back, we can see that Amphastar Pharmaceuticals’s margin dropped by 3.9 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

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 14.7%, 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. Uneventfully, Amphastar Pharmaceuticals’s ROIC has stayed the same over the last few years. Given the company’s underwhelming financial performance in other areas, we’d like to see its returns improve before recommending the stock.

Amphastar Pharmaceuticals reported $278.4 million of cash and $609.5 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $255.6 million of EBITDA over the last 12 months, we view Amphastar Pharmaceuticals’s 1.3× net-debt-to-EBITDA ratio as safe. We also see its $21.33 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing Amphastar Pharmaceuticals beat analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock remained flat at $24.23 immediately following the results.

Updated: December 4, 2025 at 10:58 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

There are some bright spots in Amphastar Pharmaceuticals’s fundamentals, but its business quality ultimately falls short. First off, its revenue growth was solid over the last five years. And while Amphastar Pharmaceuticals’s subscale operations give it fewer distribution channels than its larger rivals, its astounding EPS growth over the last five years shows its profits are trickling down to shareholders.

Amphastar Pharmaceuticals’s P/E ratio based on the next 12 months is 8.1x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $32 on the company (compared to the current share price of $26.93).