Investment Idea

Novo Nordisk – will the comeback continue?

09/11/2017 | 3 min read

Danish drug maker Novo Nordisk is rallying since the beginning of the year 2017. But the stock is still trading below the former highs in 2016. Now Swedish Bank Handelsbanken rates Novo Nordisk a Buy. Will the surge continue?

The stock of Danish drug maker Novo Nordisk is rallying since the beginning of the year 2017. The company is market leader in treatment of diabetes. The research of Handelsbanken forecasts a growth in earnings per share and growth in the market share. Recently launched or late-stage development products could strengthen Novo Nordisk’s position.

Novo Nordisk has five product areas regarding diabetes care, obesity and weight management, haemophilia management, growth hormone therapy and hormone replacement therapy.

Approval of semaglutide could largely strengthen revenue

In mid-October the US drug administration FDA voted with 16:0 for an admission recommendation for the new semaglutide of Novo Nordisk. Handelsbanken rates the probability for the approval to 95 percent. According to analyst reports semaglutide could generate revenues of EUR 375 million in 2018 and the drug could burst the EUR one billion landmark in 2019. In 2020 semaglutide could have the potential to even bring in profits of about EUR 1,79 billion. However, the future development needs to be seen.

Danish drug maker Novo Nordisk is based near Copenhagen and has about 41,000 employees in 75 countries. The products of the company are distributed in about 180 countries. Novo Nordisk makes about 35 percent of its revenue in North America, 30 percent in Western Europe and about 24 percent in the Asia-Pacific-Area. Only about 4 percent of the revenue is gained in the Nordic area.

Novo Nordisk with high profitability

Novo Nordisk third quarter revenue equals EUR 3,577 million. The EBITDA yields with a margin of 47,9 percent to EUR 1,714 million. Net income equal about EUR 1,313 million, which is a margin of 36,7 percent. Earnings per share grew 2,3 percent on a year-over-year basis to EUR 0,53. However the future development remains to be seen.

At the moment Novo Nordisk shares are traded at EUR 43,05 (08.11.2017). The stock reached its annual high at EUR 43,80 (19.10.2017) and its low at EUR 30,35 (02.02.2017). Bloomberg analysts estimate a price-earnings-ratio of 20,61 and a dividend yield of 1,89 percent. 15 analysts rate Novo Nordisk on Buy, 15 on Hold and 7 on Sell. Novo Nordisk current market capitalization equals EUR 106.75 billion.

The further share performance is depending on different corporate-, industry- and economic factors. Investors should consider the risks in their investment decisions. It is possible that developments run different than investors expect them whereby losses could occur.

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