Novartis (SWX:NOVN) - Share price, News & Analysis

Q: What is the Fair Price of NOVN when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

NOVN (CHF74.39) is trading below our estimate of [[fair value]] (CHF203)

NOVN fundamental analysis
Snowflake Score
Valuation	6/6
Future Growth	2/6
Past Performance	6/6
Financial Health	5/6
Dividends	5/6

NOVN Stock Overview

Novartis AG researches, develops, manufactures, and markets healthcare products worldwide.

Rewards

Trading at 63.4% below our estimate of its fair value

Earnings are forecast to grow 3.92% per year

Earnings grew by 155.8% over the past year

Pays a reliable dividend of 4.07%

Trading at good value vs. peer average Price-To-Earnings ratio

Trading at good value vs. industry average Price-To-Earnings ratio

Trading below our calculated fair Price-To-Earnings ratio

Analysts in good agreement that stock price will rise by 21.1%

Risk Analysis

No risks detected for NOVN from our risk checks.

Novartis Competitors

Roche Holding

SWX:ROG

CHF257.2b

Vifor Pharma

SWX:VIFN

CHF11.6b

Cosmo Pharmaceuticals

SWX:COPN

CHF725.0m

Lonza Group

SWX:LONN

CHF33.0b

Price History & Performance

Summary of all time highs, changes and price drops for Novartis
Historical stock prices
Current Share Price	CHF74.39
52 Week High	CHF88.42
52 Week Low	CHF72.84
Beta	0.49
1 Month Change	-6.98%
3 Month Change	-7.99%
1 Year Change	-3.68%
3 Year Change	-11.60%
5 Year Change	-11.65%
Change since IPO	99.97%

Recent News & Updates

Aug 28

Here's Why Novartis (VTX:NOVN) Can Manage Its Debt Responsibly

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility...

Shareholder Returns

	NOVN	CH Pharmaceuticals	CH Market
7D	-1.8%	-1.7%	-3.1%
1Y	-3.7%	-0.7%	-15.7%

Return vs Industry: NOVN underperformed the Swiss Pharmaceuticals industry which returned -0.7% over the past year.

Return vs Market: NOVN exceeded the Swiss Market which returned -15.7% over the past year.

Price Volatility

Is NOVN's price volatile compared to industry and market?
NOVN volatility
NOVN Average Weekly Movement	2.1%
Pharmaceuticals Industry Average Movement	5.5%
Market Average Movement	4.3%
10% most volatile stocks in CH Market	7.5%
10% least volatile stocks in CH Market	2.2%

Stable Share Price: NOVN is less volatile than 75% of Swiss stocks over the past 3 months, typically moving +/- 2% a week.

Volatility Over Time: NOVN's weekly volatility (2%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1996	108,000	Vas Narasimhan	https://www.novartis.com

Novartis AG researches, develops, manufactures, and markets healthcare products worldwide. The company operates through two segments, Innovative Medicines and Sandoz. The Innovative Medicines segment offers prescription medicines for patients and healthcare providers.

Novartis Fundamentals Summary

How do Novartis's earnings and revenue compare to its market cap?
NOVN fundamental statistics
Market Cap	CHF162.38b
Earnings (TTM)	CHF22.52b
Revenue (TTM)	CHF51.73b

7.2x

P/E Ratio

3.1x

P/S Ratio

Is NOVN overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
NOVN income statement (TTM)
Revenue	US$52.79b
Cost of Revenue	US$14.99b
Gross Profit	US$37.80b
Other Expenses	US$14.82b
Earnings	US$22.98b

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

Oct 25, 2022

Earnings per share (EPS)	10.53
Gross Margin	71.61%
Net Profit Margin	43.54%
Debt/Equity Ratio	46.5%

How did NOVN perform over the long term?

See historical performance and comparison

Dividends

4.1%

Current Dividend Yield

33%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

Is NOVN undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

6/6

Valuation Score 6/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for NOVN?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for NOVN. This is calculated by dividing NOVN's market cap by their current preferred multiple.
What is NOVN's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	US$165.70b

NOVN key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	3.4x
Enterprise Value/EBITDA	9.6x
PEG Ratio	1.8x

Price to Earnings Ratio vs Peers

How does NOVN's PE Ratio compare to its peers?

NOVN PE Ratio vs Peers

The above table shows the PE ratio for NOVN vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	38.6x
ROG Roche Holding	17.5x	7.6%	CHF257.2b
VIFN Vifor Pharma	78.8x	42.3%	CHF11.6b
COPN Cosmo Pharmaceuticals	21.7x	48.8%	CHF725.0m
LONN Lonza Group	36.3x	16.9%	CHF33.0b
NOVN Novartis	7.2x	3.9%	CHF162.4b

Price-To-Earnings vs Peers: NOVN is good value based on its Price-To-Earnings Ratio (7.2x) compared to the peer average (38.6x).

Price to Earnings Ratio vs Industry

How does NOVN's PE Ratio compare vs other companies in the European Pharmaceuticals Industry?

Price-To-Earnings vs Industry: NOVN is good value based on its Price-To-Earnings Ratio (7.2x) compared to the European Pharmaceuticals industry average (17.5x)

Price to Earnings Ratio vs Fair Ratio

What is NOVN's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

NOVN PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	7.2x
Fair PE Ratio	38.8x

Price-To-Earnings vs Fair Ratio: NOVN is good value based on its Price-To-Earnings Ratio (7.2x) compared to the estimated Fair Price-To-Earnings Ratio (38.8x).

Share Price vs Fair Value

What is the Fair Price of NOVN when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: NOVN (CHF74.39) is trading below our estimate of fair value (CHF203)

Significantly Below Fair Value: NOVN is trading below fair value by more than 20%.

Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Target price is more than 20% higher than the current share price and analysts are within a statistically confident range of agreement.

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Future Growth

How is Novartis forecast to perform in the next 1 to 3 years based on estimates from 21 analysts?

Future Growth Score

2/6

Future Growth Score 2/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

3.9%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: NOVN's forecast earnings growth (3.9% per year) is above the savings rate (-0.2%).

Earnings vs Market: NOVN's earnings (3.9% per year) are forecast to grow slower than the Swiss market (9.1% per year).

High Growth Earnings: NOVN's earnings are forecast to grow, but not significantly.

Revenue vs Market: NOVN's revenue (1.8% per year) is forecast to grow slower than the Swiss market (4.4% per year).

High Growth Revenue: NOVN's revenue (1.8% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: NOVN's Return on Equity is forecast to be high in 3 years time (21.7%)

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Past Performance

How has Novartis performed over the past 5 years?

Past Performance Score

6/6

Past Performance Score 6/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

17.7%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: NOVN has high quality earnings.

Growing Profit Margin: NOVN's current net profit margins (43.5%) are higher than last year (17.4%).

Past Earnings Growth Analysis

Earnings Trend: NOVN's earnings have grown by 17.7% per year over the past 5 years.

Accelerating Growth: NOVN's earnings growth over the past year (155.8%) exceeds its 5-year average (17.7% per year).

Earnings vs Industry: NOVN earnings growth over the past year (155.8%) exceeded the Pharmaceuticals industry 19.1%.

Return on Equity

High ROE: NOVN's Return on Equity (36.5%) is considered high.

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Financial Health

How is Novartis's financial position?

Financial Health Score

5/6

Financial Health Score 5/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: NOVN's short term assets ($38.1B) exceed its short term liabilities ($27.6B).

Long Term Liabilities: NOVN's short term assets ($38.1B) exceed its long term liabilities ($32.3B).

Debt to Equity History and Analysis

Debt Level: NOVN's net debt to equity ratio (15.3%) is considered satisfactory.

Reducing Debt: NOVN's debt to equity ratio has increased from 43.6% to 46.5% over the past 5 years.

Debt Coverage: NOVN's debt is well covered by operating cash flow (48.5%).

Interest Coverage: NOVN's interest payments on its debt are well covered by EBIT (17.9x coverage).

Balance Sheet

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Dividend

What is Novartis's current dividend yield, its reliability and sustainability?

Dividend Score

5/6

Dividend Score 5/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage

4.07%

Current Dividend Yield

Dividend Yield vs Market

Novartis Dividend Yield vs Market

How does Novartis dividend yield compare to the market?
Segment	Dividend Yield
Company (Novartis)	4.1%
Market Bottom 25% (CH)	2.1%
Market Top 25% (CH)	4.4%
Industry Average (Pharmaceuticals)	3.0%
Analyst forecast in 3 Years (Novartis)	4.5%

Notable Dividend: NOVN's dividend (4.07%) is higher than the bottom 25% of dividend payers in the Swiss market (2.12%).

High Dividend: NOVN's dividend (4.07%) is low compared to the top 25% of dividend payers in the Swiss market (4.42%).

Stability and Growth of Payments

Stable Dividend: NOVN's dividends per share have been stable in the past 10 years.

Growing Dividend: NOVN's dividend payments have increased over the past 10 years.

Earnings Payout to Shareholders

Earnings Coverage: With its reasonably low payout ratio (32.8%), NOVN's dividend payments are well covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: With its reasonable cash payout ratio (58.3%), NOVN's dividend payments are covered by cash flows.

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Management

How experienced are the management team and are they aligned to shareholders interests?

3.8yrs

Average management tenure

CEO

Vas Narasimhan (46 yo)

4.58yrs

Tenure

US$11,656,325

Compensation

Dr. Vasant Narasimhan, also known as Vas, M.D., serves as Chief Executive Officer of Novartis AG at Novartis India Ltd. Dr. Narasimhan has been Chief Executive Officer of Novartis AG since February 1, 2018...

CEO Compensation Analysis

Vas Narasimhan's Compensation vs Novartis Earnings

How has Vas Narasimhan's remuneration changed compared to Novartis's earnings?
Date	Total Comp.	Salary	Company Earnings
Jun 30 2022	n/a	n/a	US$23b
Mar 31 2022	n/a	n/a	US$24b
Dec 31 2021	US$12m	US$2m	US$24b
Sep 30 2021	n/a	n/a	US$10b
Jun 30 2021	n/a	n/a	US$9b
Mar 31 2021	n/a	n/a	US$8b
Dec 31 2020	US$12m	US$2m	US$8b
Sep 30 2020	n/a	n/a	US$7b
Jun 30 2020	n/a	n/a	US$7b
Mar 31 2020	n/a	n/a	US$7b
Dec 31 2019	US$12m	US$2m	US$7b
Sep 30 2019	n/a	n/a	US$7b
Jun 30 2019	n/a	n/a	US$7b
Mar 31 2019	n/a	n/a	US$13b
Dec 31 2018	US$10m	US$2m	US$13b
Sep 30 2018	n/a	n/a	US$14b
Jun 30 2018	n/a	n/a	US$14b
Mar 31 2018	n/a	n/a	US$8b
Dec 31 2017	US$5m	US$864k	US$7b
Sep 30 2017	n/a	n/a	US$7b
Jun 30 2017	n/a	n/a	US$7b
Mar 31 2017	n/a	n/a	US$6b
Dec 31 2016	US$4m	US$753k	US$7b

Compensation vs Market: Vas's total compensation ($USD11.66M) is above average for companies of similar size in the Swiss market ($USD6.79M).

Compensation vs Earnings: Vas's compensation has been consistent with company performance over the past year.

Leadership Team

Experienced Management: NOVN's management team is considered experienced (3.8 years average tenure).

Board Members

Experienced Board: NOVN's board of directors are considered experienced (7.1 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.

Ownership Breakdown

What is the ownership structure of NOVN?
Owner Type	Number of Shares	Ownership Percentage
Individual Insiders	2,127,283	0.1%
Private Companies	85,135,960	3.9%
General Public	958,410,403	43.9%
Institutions	1,137,114,942	52.1%

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Top Shareholders

Top 25 shareholders own 41.81% of the company

Ownership	Name	Shares	Current Value	Change %	Portfolio %
12.37%	JPMorgan Chase & Co, Private Banking and Investment Banking Investments	270,072,400	$20.1b	0.01%	8.37%
3.9%	Sandoz Family Office SA	85,135,960	$6.3b	0%	no data
3.69%	The Vanguard Group, Inc.	80,519,664	$6.0b	1.51%	0.14%
2.67%	UBS Asset Management	58,336,970	$4.3b	-0.97%	0.86%
2.45%	Wellington Management Group LLP	53,473,512	$4.0b	1.11%	0.74%
2.3%	Norges Bank Investment Management	50,212,891	$3.7b	0%	0.51%
2.29%	Credit Suisse Asset Management (Switzerland)	50,012,984	$3.7b	0%	3.56%
2.03%	Dodge & Cox	44,214,539	$3.3b	-12.83%	1.96%
1.6%	Capital Research and Management Company	34,850,314	$2.6b	0.01%	0.18%
0.81%	PRIMECAP Management Company	17,604,080	$1.3b	-1.02%	1.23%
0.76%	Loomis Sayles & Company, L.P.	16,528,862	$1.2b	-0.22%	2.34%
0.72%	Artisan Partners Limited Partnership	15,787,983	$1.2b	4.9%	1.22%
0.69%	Geode Capital Management, LLC	14,970,929	$1.1b	1.75%	0.15%
0.68%	Deutsche Asset & Wealth Management	14,744,883	$1.1b	0.02%	0.48%
0.62%	Zürcher Kantonalbank, Investment Arm	13,497,985	$1.0b	0%	10.03%
0.55%	Fisher Asset Management, LLC	12,062,613	$897.3m	4.01%	0.68%
0.52%	Pictet Asset Management Limited	11,276,767	$838.9m	-0.45%	0.76%
0.45%	Charles Schwab Investment Management, Inc.	9,839,164	$731.9m	0.42%	0.2%
0.45%	Dimensional Fund Advisors LP	9,740,117	$724.6m	0.02%	0.18%
0.44%	Ontario Teachers' Pension Plan Board	9,700,000	$721.6m	0%	6.25%
0.4%	State Street Global Advisors, Inc.	8,669,829	$644.9m	0.07%	0.04%
0.38%	Massachusetts Financial Services Company	8,208,491	$610.6m	-0.01%	0.16%
0.37%	Franklin Resources, Inc.	8,135,657	$605.2m	-0.45%	0.26%
0.37%	J.P. Morgan Asset Management, Inc.	7,988,815	$594.3m	-6.71%	0.11%
0.32%	Boston Partners Global Investors, Inc.	7,039,702	$523.7m	-0.65%	0.45%

Ticker	Exchange	Primary Security	Security Type	Country	Currency	Listed on
NVS	NYSE (New York Stock Exchange)		ADR EACH REPR 1 CHF0.50(REGD)(EUR)	US	USD	Nov 1991
NVS N	BMV (Bolsa Mexicana de Valores)		ADR EACH REPR 1 CHF0.50(REGD)(EUR)	MX	MXN	Nov 1991
NOTA	DB (Deutsche Boerse AG)		ADR EACH REPR 1 CHF0.50(REGD)(EUR)	DE	EUR	Nov 1991
0K9E	LSE (London Stock Exchange)		ADR EACH REPR 1 CHF0.50(REGD)(EUR)	GB	USD	Nov 1991
NVSE.F	OTCPK (Pink Sheets LLC)	Yes	Common Stock	US	USD	Dec 1996
NOVN	SWX (SIX Swiss Exchange)	Yes	Common Stock	CH	CHF	Dec 1996
0QLR	LSE (London Stock Exchange)	Yes	Common Stock	GB	CHF	Dec 1996
NOVN N	BMV (Bolsa Mexicana de Valores)	Yes	Common Stock	MX	MXN	Dec 1996
NVS	BASE (Buenos Aires Stock Exchange)		CEDEAR EACH 4 REP 1	AR	ARS	Dec 2003
NVSD	BASE (Buenos Aires Stock Exchange)		CEDEAR EACH 4 REP 1	AR	USD	Dec 2003
NOVNEE	SWX (SIX Swiss Exchange)		CHF0.50 (2ND BUYBACK LINE)	CH	CHF	Mar 2008
N1VS34	BOVESPA (Bolsa de Valores de Sao Paulo)		BDR EACH 10 REPR 1 ADR	BR	BRL	Sep 2022

Data	Last Updated (UTC time)
Company Analysis	2022/09/28 00:00
End of Day Share Price	2022/09/28 00:00
Earnings	2022/06/30
Annual Earnings	2021/12/31