Four of the 30 stocks that make up the Dow Jones Industrial Average represent the healthcare sector. Within that group, biotechnology giant Amgen (AMGN 0.06%) has been the best-performing stock in 2025, returning an impressive 21% year to date. Meanwhile, shares of its pharmaceutical rival Merck (MRK -0.58%) have lagged, down 8% in the same period.

Amgen shareholders are celebrating, but have you wondered which stock is cheaper right now? Let's discuss whether Amgen or Merck stock offers better value.

Amgen and Merck: The P/E ratio

The price-to-earnings (P/E) ratio is a financial metric that divides a stock's price by its earnings per share (EPS) as a quick way to assess a company's valuation. A lower P/E ratio suggests the stock is cheaper relative to its earnings, though growth prospects and financial health add critical context.

Based on Wall Street analyst estimates for 2025 EPS, Amgen trades at 15 times its projected earnings, while Merck sits at a forward P/E of 10. By this measure, Merck is the cheaper stock and a relative bargain, reinforced by its larger dividend yield of 3.4% compared to Amgen's 2.9%.

AMGN PE Ratio (Forward) data by YCharts.

Amgen deserves its premium

Amgen may be the more expensive stock, but several things suggest that it deserves its valuation premium and that its stock price can keep climbing.

Amgen is generating stronger growth. Its 2024 revenue increased by 19% year over year, well above Merck's 7% annual change. The company has seen robust demand across its portfolio, including multiple best-in-class blockbusters. There is also anticipation building for MariTide, its experimental obesity drug entering phase 3 trials, which could position the company to enter the GLP-1 weight loss and diabetes market.

On the other hand, Merck faces greater headwinds. Disappointing sales for its Gardasil vaccine against human papillomavirus (HPV), alongside uncertainty regarding the looming loss of patent exclusivity for its Keytruda cancer drug, continue to weigh on its stock price. Ultimately, the P/E ratio is a good starting point for further investing research.