We've been asking ourselves recently if the market has placed a fair valuation on Novo Nordisk A/S. Let's dive into some of the fundamental values of this large-cap Health Care company to determine if there might be an opportunity here for value-minded investors.
Novo Nordisk A/S's Valuation Is in Line With Its Sector Averages:
Novo Nordisk A/S, a healthcare company, engages in the research, development, manufacture, and marketing of pharmaceutical products worldwide. The company belongs to the Health Care sector, which has an average price to earnings (P/E) ratio of 24.45 and an average price to book (P/B) ratio of 4.16. In contrast, Novo Nordisk A/S has a trailing 12 month P/E ratio of 41.7 and a P/B ratio of 4.92.
Novo Nordisk A/S's PEG ratio is 93.4, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
The Business Has Operating Margins Consistently Higher Than the 12.02% industry Average:
| 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $107,927 | $111,780 | $111,780 | $111,831 | $122,021 | $126,946 |
| Gross Margins | 85% | 85% | 84% | 84% | 84% | 84% |
| Operating Margins | 46% | 44% | 44% | 44% | 43% | 43% |
| Net Margins | 33% | 34% | 36% | 36% | 33% | 33% |
| Net Income (MM) | $35,968 | $37,925 | $39,925 | $39,925 | $40,116 | $42,138 |
| Net Interest Expense (MM) | $67 | $67 | $90 | $90 | $220 | $390 |
| Depreciation & Amort. (MM) | $2,959 | $3,193 | $3,193 | $3,925 | $5,661 | $5,753 |
| Free Cash Flow (MM) | $38,287 | $48,314 | $48,314 | $44,616 | $46,782 | $51,951 |
| Net Current Assets (MM) | n/a | $7,496 | $7,540 | $1,150 | -$5,563 | -$15,788 |
| Long Term Debt (MM) | n/a | $4,834 | $5,104 | $4,766 | $9,036 | $11,324 |
| Net Debt / EBITDA | nan | 0.48 | 0.49 | 0.62 | 0.75 | 0.98 |
Novo Nordisk A/S has strong margins with a stable trend, low leverage, and wider gross margins than its peer group. Furthermore, Novo Nordisk A/S has weak revenue growth and no capital expenditures, positive expected EPS Growth, and irregular cash flows.
