Key Stats for Novo Nordisk A/S (ADR)
The Danes have been working on this drug business for 90 years, and it's been a 10 bagger in the last 10 years! Is the future so bright?
| Ticker | NVO |
|---|---|
| Sector | Pharmaceuticals |
| Latest price | $34.08 |
| Value | $67,659M |
| Daily vol | $104M |
| Date | 06 February 2017 |
Useful Links
- Latest news from Google Finance and Yahoo Finance
- Latest results from SEC Edgar
- Website: novonordisk.com
Description
Novo Nordisk is a healthcare company. The Company's business segments include diabetes and obesity care, and biopharmaceuticals.
- The diabetes and obesity care segment covers insulins, glucagon-like peptide-1 (GLP-1), other protein-related products (such as glucagon, protein-related delivery systems and needles), oral anti-diabetic drugs and obesity.
- The biopharmaceuticals segment covers the therapy areas of hemophilia care, growth hormone therapy and hormone replacement therapy.
- Though 79% of sales are in the diabetes / obesity unit
Recent financials
Being Danish, they report 20-Fs to the SEC once a year, not 10-Ks and 10-Qs. Plus the headline sales are in Danish Kroner.
In DKK the sales have grown +60% in 5 years and earnings more than doubled. Even with a strong dollar the EPS is up +90%.
| Metric | 2016A | 2015A | 2014A | 2013A | 2012A | 2011A |
|---|---|---|---|---|---|---|
| Revenue | DKK 112bn | DKK 108bn | DKK 89bn | DKK 84bn | DKK 78bn | DKK 66bn |
| EPS | DKK 14.96 | DKK 13.52 | DKK 10.07 | DKK 9.35 | DKK 7.77 | DKK 6.0 |
| Revenue | $16bn | $16bn | $16bn | $15bn | $13bn | $12bn |
| EPS | $2.17 | $2.01 | $1.79 | $1.66 | $1.34 | $1.12 |
What's not to like with that!
Competition
Here's how the outline the competition
Historically, the market for insulin has been more sensitive to the quality of products and services than to price. Most of the countries in which Novo Nordisk sells insulin subsidize or control pricing and in most markets insulin and GLP-1 are prescription drugs.
Payers globally have managed the cost of diabetes care by exerting pressure on the prices of Novo Nordisk’s products and competitors have tried to capture market share from Novo Nordisk. In spite of this, Novo Nordisk has been able to maintain the leading position
Due to the increasing number of people with diabetes, the pharmaceutical market for treatment of diabetes continues to grow. Several of the major international pharmaceutical companies have entered the diabetes market, specifically in the area of oral products for treatment of type 2 diabetes. In the global insulin market, Novo Nordisk, Sanofi and Eli Lilly are the most significant companies measured by market share.
From a profit and margin perspective, they are way ahead of the peers. Enough said?
| Companies | Latest Sales | Operating Profit | Return on Equity |
|---|---|---|---|
| Novo Nordisk A/S (ADR) | $16,202M | 46% | 82% |
| Eli Lilly and Co | $21,222M | 24% | N/A |
| Sanofi SA (ADR) | $37,032M | 32% | 8% |
| Johnson & Johnson | $71,890M | 32% | N/A |
| Roche Holding Ltd. (ADR) | $50,963M | 40% | 43% |
Cash / Debt?
Novo Nordisk has $2,967M of net cash. That is the equivalent of 4% of the market value of Novo Nordisk.
Wall Street thinks?
The professionals on Wall Street have a $36.70 for $NVO and their recommendation to clients is Sell. That a little surprising since it's 8% above the current price.
Valuation
And looking at the general valuation metrics, PE, yield, cash-flow, there's nothing that stands out about $NVO. Even the long-term growth expectation is respectable.
| View Peers | Valuation | Forecast PE | Long-term Growth | Dividend Yield | FCF Yield |
|---|---|---|---|---|---|
| NVO | $67,659M | 15x | 9% | 3% | 10% |
| LLY | $85,258M | 19x | 11% | 3% | n/a |
| SNY | $105,109M | 13x | 6% | 4% | 12% |
| JNJ | $309,161M | 16x | 6% | 3% | n/a |
| RHHBY.PK | $205,677M | 16x | 7% | 4% | 10% |
Dividends
Novo Nordisk pays dividends with a forecast dividend of $1.09 per share, compared a forecast EPS of $2.30 in 2017. Plus they have an aggressive share buyback program on to.
Catalysts & Conclusions
After clocking up a lot of love in the 10 years to Feb 2015... it's been a nightmare since. Multiple profit warnings, and the "final" blow in October when Wall Street finally threw the towel in halving their target price.
The last 3 months have almost been pleasant in contrast, with the stock flat and earnings forecast even getting a modest uptick, as we roll forward to 2017 forecasts.
But here's the guidence
For 2017, reported sales growth is expected to be 1-6% measured in Danish kroner, positively impacted by currencies of 2 percentage points. Reported operating profit growth is expected to be 0-5% measured in Danish kroner, positively impacted by currencies of 2 percentage points.
So a once exciting 10 bagger is no longer exciting. Even though earnings have crept up over the last 2 years, the PE has compressed from 35x to 16x. So now that the party's over what are we left with?
A well run company, good margins, strong market position, but facing buyer, competition and patent pressure. Okay, it's not Gilead, i.e. ex-growth, but guess what... it's joined the ranks of the pharma has-beens. Reminds me of $BMY's train wreck.
Sorry, this one ain't for me.
Aside
But I think it's worth while we go back and look at $GILD and $NVO before they became 10 baggers to see what they looked like before the price rose 10x. Would love to see what signs existed! Anyone seem that analysis?
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Disclosure: I have no position in any of the stocks mentioned. However I may initiate a position within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Reddit, moderators, and the author do not advise making investment decisions based on discussion in these posts. Analysis is not subject to validation and users take action at their own risk.
Author notes: u/shane_stockflare works at a financial website, Stockflare, and is a Chartered Financial Analyst.
Submitted February 06, 2017 at 05:41PM by shane_stockflare http://ift.tt/2jVEnE5
