Novozymes (CPSE:NSIS B) shares have moved moderately over the past month, following steady revenue and net income growth in recent annual results. Investors keeping an eye on long-term trends may be reassessing the company’s valuation after these updates.
Novozymes’ share price has climbed 3.2% over the past month and surged more than 6% in the last week, suggesting renewed investor interest amid its ongoing growth story. However, the total shareholder return over the past year is still slightly negative at -1.6%, which points to momentum that is recovering but not yet consistent across longer timeframes.
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Given Novozymes’ recent uptick in share price, along with solid growth in revenue and net income, the key question emerges: is this sustainable momentum a sign of undervaluation, or has the market already priced in its future potential?
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Price-to-Earnings of 47.1x: Is it justified?
Novozymes is currently trading at a price-to-earnings (P/E) ratio of 47.1x, which is considerably higher than both its industry peers and what might be expected based on its growth. The latest closing price of DKK412.9 suggests investors are valuing future earnings quite aggressively relative to the sector.
The price-to-earnings ratio is a widely used measure for valuing companies, showing how much investors are willing to pay per krone of earnings. In sectors with stable profits, a high P/E can signal strong confidence in future earnings growth and profitability.
However, Novozymes’ current P/E stands well above the European Chemicals industry average of 17.4x, as well as the peer group average of 33.4x. The market appears to be factoring in an optimistic outlook that surpasses sector norms and even the estimated fair P/E of 29.9x. This benchmark often acts as a ceiling during revaluations.
Given this substantial premium, the share price looks expensive on a relative basis. Investors should note that if the market revisits this fair ratio, there could be a shift in how Novozymes' shares are valued going forward.
While Novozymes’ earnings ratio suggests the stock is expensive compared to peers, our DCF model offers a strikingly different perspective. Based on projected future cash flows, the SWS DCF model values Novozymes at DKK598.37 per share, which is well above the current price. Is the market underestimating its long-term value?
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Novozymes for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 875 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Build Your Own Novozymes Narrative
If these conclusions do not align with your own insights, you’re welcome to review the facts and piece together your perspective in just a few minutes. Do it your way
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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.
Valuation is complex, but we're here to simplify it.
Discover if Novozymes might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
Produces and sells industrial enzymes, functional proteins, and microorganisms in Denmark, rest of Europe, North America, the Asia Pacific, the Middle East, Africa, Latin America, and internationally.
