Incredible Novo Nordisk (NVO) Down 10% | Perfect Time To Buy? | NVO Stock Analysis! |

earning Seasons continues and today under the spotlight we have Novo nordis the pharmaceutical giant now they did report their earnings before Market open and they are down nearly 8% and in fact over the last month they are down 16% now trading in the midpoint of the 52 we range now when we take a look at their earnings at a very high level we can see their shares did drop as they in fact posted an earnings Miss and coupled that with an oper rating profit Outlook that has been cut does not look too good for investors now we'll take a look at some of the numbers but we can in fact see operating profit has now come to around 20 to 28% which you could argue firsthand does still look to be very strong but bear in mind this is a company that does trade already at a very rich valuation as that is why we have now seen these share price come down so in terms of the numbers well net profit came in at just over 20 billion and we can in fact see here that the market were anticipating around 20.9 so unfortunately that was a Miss straight off the bat the second one the ebit earnings before interest and tax 2.93 billion and in fact again another Miss under the 26.8 6 that the market wanted to see now as we mentioned already fairly high as it was the operating outlook for the full year is now looking to be around 20 to 28% and in fact it was previous at the 22 to 30% level so a very small look but again the market does not like to see this for a company that does trade at a very rich valuation which we will come to look at when we put it through our own valuation model one thing to note however we did see the net profit is increased around 28% when we look at it on a year-on-year basis and whil they have cut the operating profit Outlook they in fact increased their Topline revenue for the full year around 22 to 28% as we can see previously this was sat at 19 to 27 so before we look at the underlining metrics of this company let's just point out from their own investor presentation how good these numbers were now we're comparing the first 6 months of 2024 to the first six from 2023 we can already see their top line at 133 billion is up around 24% so that is off to a great start as we said they are expecting in the 20s for the full year of 2024 gross profit also up as we can see by the same percentage 24 and when we look at the operating profit looking very healthy 57.7 18 billion and whilst that is up around 18% one thing that we do have to point out the operating margin is down 43.3% versus the 45.4 that we saw from last year in terms of the bottom line 45 billion and that is up 16% and also we can see their earnings per share 10.17 up from 8.71 around 177% so the numbers do tell us this company does continue to grow at the Double Digit rate that we expect and then when we do move on and take a look at Capital allocation this is one thing that I would advise when you're looking at any companies you hold or are considering always see the way that they do use that Capital allocation so a few things that Novo Nordic do is in fact the return of free cash flow through those share BuyBacks and dividends something that we talk a lot about on this channel very nice to note we'll cover this shortly but they did increase the dividend at a very rapid rate 51.6% and what they have also pointed out is they are going to continue that repurchase program for 20124 up to around 20 billion Danish Crona now in terms of the year-on-year movement what we are noticing is that the share repurchase estimated for 2024 is going to be at the lower end of the last four years nonetheless one thing that we always like to see are those dividend increases and that is something that they continue to do over the last few years always worth looking as well at the Financial outlook for these companies as we mentioned their Topline they actually increased their guidance from may just today 22 to 28% as we can see expectation 19 to 27 so it is an increase although fairly marginal what we can see in terms of the operating profit growth they have lowered that again as we saw the massive headline and operating cup 20 to 28 down from 22 to 30 and the final thing that we like to point out as it is very important not just to us when we look at companies but also our valuation is that their free cash flow has increased from the 57 to 67 to the 59 to 69 now as a quick recap yes this company is down around 8% is also down over the last month year-to date however it is up around 16% over the last 12 months up 48% and if you've been a long-term shareholder this is up 437 over the last 10 years significantly outperforming the SNP now as we mentioned it isn't the midpoint of the 52e range and does trade at a fairly High forward P now it's around 38.5 bear in mind though it has just dropped today and it is still a buy for Wall Street with a hold from Seeking Alpha and Quant and whilst it does have a lower yield than maybe what we want to see on the channel 1.05% we're now going to take a look and as we already mentioned they did increase that by 52% over the last four year in terms of dividend safety will a 99 score very safe in fact the highest score obtainable what this ultimately means is that a dividend cup is highly unlikely now for those that see a recession inbound in the Great Recession 0709 they actually increased the dividend they had plus 6% sales which was well above the average of the S&P at -12 and they also significantly outperformed the snp's total return -27 with the S&P coming in - 55 one thing we love to see here double digit increase over the last four year over the last five as well as the last 20 years this is definitely one of those are very strong dividend growth companies that not only increase the dividend at a rapid rate but also as we saw out forms the SNP they also have dividend Aristocrat status 25 plus years of consecutively increasing those dividends and one thing we do like to look on this channel is dividend yield Theory now what it states companies undervalued when the current yield sits above the 5year average so you could argue overvaluation based on this model however on the forward P sitting around 31 it isn't this similar from the 5year average of 30 so reasonable valuation based on this and when we look at the healthcare well the sector as a whole sits much much lower at 16.6 do always bear in mind though we don't look at any of these models in isolation we will conclude when we come towards our valuation model now free cash flow below 60% is what we want to see give us Faith they can continue to offer double digit increases over the last 10 years it does straddle around that amount nice to note over the next 12 months 58% so we should expect again for the next year some nice increases we then move on to the free cash flow per share we want to see consistent increases over the longer term it has pretty much tripled over the last 10 years 1620 over the next 12 so it is anticipated to continue the upward Trend that we really want to see sales growth as we mentioned a company that has increased a double digit over the more recent period 2024 as well in the 20 to 30% region expected so that is also very nice but again you want to keep an eye on that because if if that does start to lower that will ultimately affect the valuation as it is priced in at a fairly large p in comparison to the healthcare sector numerically we'll look at this but we can in fact see more than doubled over the last 10 years and also nice to note for a company that has a dividend increases at a very nice rate they do return excess cash to shareholder Pockets through those share BuyBacks we then move on to the roic one of my favorite metrics and this company probably has one of the best numbers that we have seen on this channel remember we want to see 10% or more give us Faith management are able to effectively allocate their Capital just look at this honestly let me know in the comments below if there are any other companies that come anywhere near as strong as this 72% in 23 82% on a trading 12mth basis this is absolutely fantastic talking about fantastic well the margins looking very strong above 12% is what we want to see at a bare minimum 39 in 2014 45 in 2023 so we get a first glance of their operating efficiency increasing over the longer term and a pure free cash flow machine above 5% every single year and we're talking about nearly 30% plus over the last 10 so looking great and then we get to the net debt EIT D if you thought this company's metrics couldn't get any better well just wait earnings before interest tax depreciation ammortization below three is what we want to see remember these numbers below correlate to the number of years it would take the company to pay off all of its debt net of cash on hand 0.1 in 23 very low. 22 expected over the next 12 months very good ultimately remember this correlates to balance sheet strength and dividend safety so we have a very safe dividend score and the balance sheet as we're about to find out looks very very good also just to let you know we have released our latest free weekly article if you want access to this or any other articles do click on that pin comment below where you can sign up and read straight away we also have our list of 35 undervalued stocks that you can get access to and we run through every single one a lot of numbers why we like them and also ultimately which ones we hold so let's have a quick look at the income statement now we did talk about the revenue we love the growth in fact more than doubled over the last 10 years 14 to 34 billion and we can see the sheer consistency due to those double digit increases that are fairly consistent but our ultimate takeaway from this is what does the bottom line show us is it a very similar Trend well the answer is fairly simple Yes 4.3 billion in 2014 12 .4 in 2023 so three times growth and as we can see for the large part it is fairly consistent and moving in that right direction so that is very nice to see for shareholders as well as those that are considering adding this company then we move on to the health of the company looking at their balance sheet total cash versus total debt 2.6 billion in 2014 1.3 in the latest report so it has drop slightly but we do know fairly inconsistent over the longer term and remember that this number in isolation doesn't really tell us anything which is why we always compare it to the total depth numerically and directionally going from 117 million to just under 4 billion in that report so we can see unlike the cash which although inconsistent has decreased over the longer term the total debt again fairly inconsistent but has increased now we did note when looking at the net debt debit D it is fairly low so it does look fairly decent based on the information we have just gone through now how have they performed historically what are expectations moving forward well very nice to note over the last three quarters they have beaten on the EPS what we also note over the next three they are anticipating growth double digits and if they do hit their December 2025 EPS estimate the forward P will come down to around 31 now this will depend on whether or not you believe they can hit these numbers as when we did take a look at some of the numbers from their report they did come under and they did cut on the operating profit but nice to note as we said the revenue does look to be increasing in the guidance so let's look at some underlining metrics starting off with the valuation no surprises at all they get an F as we just saw it does trade at a rich valuation quite significantly than the sector in fact a on a non-gaap basis around 38 is well above the sector median of 21 essentially telling you as an investor if you are buying this company right now you are paying an 87% premium against the market and no surprises on any other valuation metric that you do use that is the same information hence why they get the D and the f and we can clearly see a very large premium now sometimes it is Justified that these companies do have a premium the question is understanding how much should we pay and again that is where the valuation will come into shortly but look a minus on the growth ultimately telling us the growth is a lot better than the sector 30% versus the median of seven when we look forward basis 25 versus the N9 that we can see for the sector as well and the main thing I want to draw your attention to here is that over the next 3 to 5 years EPS is anticipating to increase by 16% where we have the sector as a whole just under 12 again information just to consider when we are wondering why this company is valued very richly we then get to the profitability again another reason to understand why add an A+ phenominal phenomenal margins 85% against the 57 sector medium 36 a half when in fact the sector as a whole hasn't been doing too great -5% now the last thing that we want to talk about here is the cash from operations 13.5.1 billion again negative for the majority of the sector in fact sector media sitting at -6 mil as a quick wrap up to this part of the analysis A buy from Wall Street a double hold from the other analyst an F on valuation a minus on growth and an A+ on profitability so let's have a quick look how have they formed against others in the sector we have Eli Lily Johnson and Johnson Merk and Co the majority of these we have covered on the channel already now over the last year we do see nvo the second best performing although they are quite some distance behind Eli Lily which is up 71% remember total return includes reinvesting those dividends again pretty much the same story to be said Eli Lily right there in first place but mvo doing very strongly and a massive Gap against the other companies when we look over the last 10 years again we see something very similar and as fantastic as this may be for nvo or L investors remember past performance is not an indicator of future performance also one thing that we just want to bear in mind we're going to show you here is going to be very obvious but mvo has out formed the S&P over the last year over the Last 5 Years by quite some distance and over the last 10 but this should ultimately be a question you ask yourself as an investor whether it's this company or another do I believe it will outform the S&P if the answer is no as always do look at some lowcost ETFs now final thing before we jump into the valuation model institutional movement well the ownership sits at around 12% we've seen just under 2 billion worth of sales over the last year with around 10.2 billion worth of buy so significant amount of buys by institutions more than selling and also in the more recent quarter Q2 we also see that 377 versus 303 and pretty much you'd have to go back quite some way in fact Quarter Two of 2023 before we see the opposite effect so yes institutions are buying more especially in the more recent quarter but as always do your own due diligence before jumping into any company and never follow anyone one else's trade so jumping into the valuation as always if you do enjoy the content value is being provided smash that like button hit that subscribe and Bell button so you are continually notified of these videos as they drop now our intrinsic value of $124 how we've got to this well we want to show you so you can see whether you agree or not we've run it through the DCF model where we have the free cash flow year- on-ear the growth rate now average growth rate has come to around 11% we've gone for three different growth rates here a low medium and high 10 15 and 20% % we also just want to let you know if you were to look at the last four years the average would be sitting around 21% so we've gone in today's episode at a medium rate of 15% above the average but as we can see it is lower than the last four years as well as the last two with a discount rate we get the present value of future cash flows and terminal value add together with the cash subtract total debt get to the equ value divide by the shares outstanding and there's that 124 which would imply 4% upside now you could say that is way too optimistic lower 10% for example so for transparency we'll just show you at that 10% level $87 which would indicate downside of 27% now again others will say that this should be way higher and therefore at that 20% level it would show us 47% upside 175 that we can see here now bear in mind you can grab a copy of this model by clicking on the pin comment below running in your own numbers whether it's for this company or any others that you own or maybe you want to put on the watch list so at the 50% level that does give us the intrinsic value of 124 and this ultimately tells us that right now it isn't trading too far off the current price of 119 as always though on this channel we like a margin of safety 10% and we use that if it hits our three golden criteria a wide Mo strong financial metrics and good forward-looking data if you believe that will it buy $112 it isn't there yet but it could be moving that way given the downward Trend over the last month as in fact we just saw it is down around 15% then we keep going just to see at what level you are considering at 50 % 105 at the 20% level you would have to wait around $99 now Wall Street they don't really agree they have a price target of 147 they see upside of 24% and do consider this a buy as we saw from the initial rating now if this was something that I would consider it would be at least a 20% margin of safety around the $99 $100 mark But as always a lot of people will have different opinions so do let us know your thoughts in the comments below now as always if you do enjoy the content value is being provided smash that like button hit that subscribe and Bell button so you are continually notified don't forget to click on the pin comment below where you can sign up to the free Weekly Newsletter and also join us in the patreon if you do want to run through our weekly buys and sells as always have a great day we'll see you all in the next one and for now take care