Novo Nordisk lost half its value over the past year. Is it cheap enough to buy now?
Novo Nordisk (NVO 2.83%) — the original Ozempic stock — got a boost from private German bank Berenberg this morning, which upgraded the stock to buy. In fact, Berenberg says Novo is its “preferred obesity play,” as The Fly reports.
Novo stock is up 2.9% through 10:30 a.m. ET.
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What Berenberg said about Novo Nordisk
Novo Nordisk created the GLP-1 weight loss market — then fumbled it, allowing first Hims & Hers to horn in on the business when Novo was unable to produce enough semaglutide, then giving Eli Lilly time to develop competing products (that by some measures work better) in the form of Mounjaro and Zepbound.
Still, Berenberg argues, since Novo’s fumbles, market expectations for Novo have reset, and the stock price has gotten considerably cheaper. With Novo Nordisk shares now selling for less than 15 times earnings, paying a 3% dividend yield, and expected to grow only 8% annually over the next five years, investor expectations are a whole lot more realistic today than they were a year ago.
Is Novo Nordisk stock a buy?
Now, there’s still some debate about whether Novo Nordisk stock is a buy, based on its growth outlook, potential catalysts, and valuation, admits the analyst. A P/E of 15 with a 3% dividend and an 8% growth rate still values Novo Nordisk at a total return ratio of about 1.3 — which is more expensive than the value investor’s target of a 1.
In other words, there’s still room for Novo Nordisk to fall.
On the other hand, if the company can find its footing, perhaps by marketing Ozempic and Wegovy in upsized dosages and at attractive prices, Novo might grow faster than expected. And with fast enough growth, Novo Nordisk could quickly turn from a sell into a buy.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Hims & Hers Health. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.