Is Novartis Still Attractive After 19.3% Share Price Rally in 2025?

• Wondering if Novartis is trading at a bargain price or if its rise is already reflected in the share price? Let’s take a closer look at its value story together.
• Novartis shares have recently climbed, returning 7.0% over the last 30 days and up an impressive 19.3% year to date. This suggests that investors might be seeing renewed potential or lower risk.
• This momentum comes as a result of global healthcare trends and new approvals for some of Novartis' major drugs, giving the company fresh avenues for growth and generating positive headlines about its innovative pipeline.
• Based on our analysis, Novartis scores a strong 5 out of 6 for undervaluation. Read on as we break down how different valuation methods compare, and stay tuned for a broader perspective on value at the end.

Find out why Novartis's 18.3% return over the last year is lagging behind its peers.

Approach 1: Novartis Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s true worth by projecting its future cash flows and discounting them back to reflect today’s value. This approach relies on assumptions about how much cash a company will generate in the coming years, accounting for time and risk.

For Novartis, the latest reported Free Cash Flow stands at $18.16 billion. Analyst estimates suggest a steady increase in annual cash flow, with projections for 2029 reaching $20.97 billion and forecasted growth continuing past analyst coverage, according to Simply Wall St’s own extrapolations. These long-term projections mean Novartis is expected to steadily generate growing cash flows over the next decade.

Based on the 2 Stage Free Cash Flow to Equity DCF model, Novartis’ estimated intrinsic value comes to $280.64 per share. This valuation indicates that, given where the share price trades today, Novartis is trading at a 62.2% discount to its intrinsic value.

In summary, Novartis’ current share price appears to significantly underestimate the company’s future cash potential according to DCF analysis.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Novartis is undervalued by 62.2%. Track this in your watchlist or portfolio, or discover 928 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Novartis.

Approach 2: Novartis Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used valuation metric for profitable companies like Novartis because it directly links a company's share price to its earnings power. Investors often rely on the PE ratio to get a sense of how much they are paying for each unit of profit.

What makes a "normal" or "fair" PE ratio depends on expectations for the company's growth and the risks it faces. Higher expected earnings growth or lower risk usually justify higher PE ratios, while slower growth or greater uncertainty can push them lower.

Novartis currently trades at a PE ratio of 17.59x. This figure is below the Pharmaceuticals industry average of 22.74x and also under the peer group average of 81.84x. This indicates that the market prices Novartis more conservatively than many of its competitors and sector peers.

To give a more nuanced view, Simply Wall St calculates a proprietary “Fair Ratio” based on a blend of historical growth, profit margins, company size, industry trends, and risk profile. For Novartis, the Fair PE Ratio stands at 32.38x. This approach is considered more robust than a simple comparison to peers or industry averages, as it tailors the valuation metric to Novartis' specific fundamentals and outlook, rather than using a broad approach.

Comparing Novartis’ actual PE ratio of 17.59x to its Fair Ratio of 32.38x, the stock appears significantly undervalued by this metric, offering investors a potential opportunity if the company’s fundamentals remain sound.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1441 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Novartis Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let’s introduce you to Narratives. A Narrative is Simply Wall St’s straightforward tool that lets you attach your personal story and forecasts to a company, connecting your assumptions about future revenue, margins, and profits to a fair value, and ultimately, your investment decision.

Unlike static numbers, Narratives create a direct link between what you believe about Novartis’ future and how that translates into today’s investment opportunity. Narratives are easily accessible on Simply Wall St’s Community page, trusted by millions, and are updated automatically as soon as key news or earnings results arrive. Your insights always reflect the most current picture.

By choosing or creating your own Narrative, you can instantly see whether Novartis appears undervalued or overvalued by comparing your fair value against the real-time price. This empowers you to make decisions with more conviction. For example, one Novartis Narrative may assume robust revenue growth and a fair value of CHF120.06, while another, incorporating conservative forecasts and more risk, might land at CHF79.67. This illustrates how different perspectives can lead to distinct investment viewpoints.

Do you think there's more to the story for Novartis? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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