Novo Nordisk (NYSE:NVO) stock has experienced a significant decline, dropping 35% from over $90 in early March to around $58 currently. Several factors have contributed to this downward trend. The most recent impact stems from Eli Lilly meeting the primary goals in a late-stage trial for its daily diabetes pill. If approved, this pill’s convenience could pose a competitive threat to Novo Nordisk’s Ozempic injection, potentially leading to market share shifts. Additionally, concerns about Novo Nordisk’s pipeline, which is perceived as less diversified than some competitors, alongside rising market competition, have also weighed on the stock.
However, we believe that these concerns are now largely reflected in the current stock price. In fact, we consider NVO stock at around $58 to be extremely attractive, making it a compelling buying opportunity. Our view is that there is minimal fundamental cause for concern with Novo Nordisk; its current valuation appears exceptionally low, contributing significantly to its attractiveness.
This conclusion is based on a thorough analysis comparing NVO’s current valuation with its operating performance over recent years, as well as its present and historical financial condition. Our assessment of Novo Nordisk across key parameters including Growth, Profitability, Financial Stability, and Downturn Resilience indicates that the company maintains very strong operating performance and financial health, as will be detailed further. However, for investors who seek lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.
How Does Novo Nordisk’s Valuation Look vs. The S&P 500?
Going by what you pay per dollar of sales or profit, NVO stock’s valuation looks moderate compared to the broader market.
- Novo Nordisk has a price-to-sales (P/S) ratio of 6.2 vs. a figure of 2.8 for the S&P 500
- Additionally, the company’s price-to-operating income (P/EBIT) ratio is 14 compared to 21 for S&P 500
- And, it has a price-to-earnings (P/E) ratio of 19 vs. the benchmark’s 22
How Have Novo Nordisk’s Revenues Grown Over Recent Years?
Novo Nordisk’s Revenues have grown considerably over recent years.
- Novo Nordisk has seen its top line grow at an average rate of 23.6% over the last 3 years (vs. increase of 6.2% for S&P 500)
- Its revenues have grown 25% from $34 Bil to $42 Bil in the last 12 months (vs. growth of 5.3% for S&P 500)
How Profitable Is Novo Nordisk?
Novo Nordisk’s profit margins are much higher than most companies in the Trefis coverage universe.
- Novo Nordisk’s Operating Income over the last four quarters was $118 Bil, which represents a considerably high Operating Margin of 44% (vs. 13.1% for S&P 500)
- Novo Nordisk’s Operating Cash Flow (OCF) over this period was $18 Bil, pointing to a solid OCF-to-Sales Ratio of 42% (vs. 15.7% for S&P 500)
Does Novo Nordisk Look Financially Stable?
Novo Nordisk’s balance sheet looks strong.
- Novo Nordisk’s Debt figure was $15 Bil at the end of the most recent quarter, while its market capitalization is $283 Bil (as of 4/17/2025). This implies a low Debt-to-Equity Ratio of 5% (vs. 21.5% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
- Cash (including cash equivalents) makes up $4 Bil of the $68 Bil in Total Assets for Novo Nordisk. This yields a low Cash-to-Assets Ratio of 6% (vs. 15.0% for S&P 500)
How Resilient Is NVO Stock During A Downturn?
NVO stock has been much more resilient than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
- NVO stock fell 16.9% from a high of $56.00 on 1 January 2022 to $46.55 on 26 January 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
- The stock fully recovered to its pre-Crisis peak by 30 March 2022
- Since then, the stock has increased to a high of $146.91 on 25 June 2024 and currently trades at around $58
Covid Pandemic (2020)
- NVO stock fell 23.6% from a high of $32.39 on 4 March 2020 to $24.73 on 20 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
- The stock fully recovered to its pre-Crisis peak by 24 April 2020
Global Financial Crisis (2008)
- NVO stock fell 42.5% from a high of $7.30 on 8 April 2008 to $4.20 on 15 April 2009, vs. a peak-to-trough decline of 56.8% for the S&P 500
- The stock fully recovered to its pre-Crisis peak by 5 March 2010
Putting All The Pieces Together: What It Means For NVO Stock
In summary, Novo Nordisk’s performance across the parameters detailed above are as follows:
- Growth: Extremely Strong
- Profitability: Very Strong
- Financial Stability: Strong
- Downturn Resilience: Extremely Strong
- Overall: Very Strong
Based on Novo Nordisk’s exceptionally strong performance across key metrics and its current moderate valuation, we believe the stock is highly attractive at its current price of $58. While past performance is strong, future prospects are also compelling. Novo Nordisk’s sales are forecast to achieve high-teen average growth over the next three years. Coupled with its robust profit margin exceeding 40%, a significant portion of this top-line growth is expected to translate directly into shareholder value. Although challenges such as increasing competition and the potential impact of the Inflation Reduction Act on drug pricing exist, we believe these risks are adequately reflected in the stock’s current moderate valuation. Therefore, we believe that NVO represents a very good buying opportunity at this level.
Preserve & Grow Wealth With Risk-Focused Quality Portfolios
While NVO stock looks promising, investing in a single stock can be risky. On the other hand, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.
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