Does Novo Nordisk’s Share Price Drop Signal Opportunity as New Obesity Drug Gets Approval?

If you're watching Novo Nordisk and wondering what your next move should be, you're not alone. With shares closing at 362.45, the stock has been a bit of a rollercoaster, down 3.5% over the last week, but still up 4.1% for the past month. Long-term investors will remember the massive 75.2% gain over five years, but recent trends haven't been friendly. Year-to-date, shares have slid 43.3%, and over the last year, they've dropped a staggering 53.5%. This shift reflects more than just short-term jitters; changing sentiment toward growth stocks and evolving market dynamics have played their part.

Despite this recent rough patch, there's real intrigue around Novo Nordisk's current valuation. According to our in-depth analysis using six classic undervaluation checks, Novo Nordisk chalks up a value score of 5 out of 6, meaning it stacks up as undervalued by most measures. That's the kind of signal that makes investors perk up, especially if you've been watching for a potential entry point or a reason to revisit your thesis.

But how do those valuation checks actually work, and what do their results mean for Novo Nordisk's future? We'll break down the usual tools for judging a stock's value, and hint at an even smarter way to cut through the noise at the end of this article.

Why Novo Nordisk is lagging behind its peers

Approach 1: Novo Nordisk Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s value by projecting its future cash flows and then discounting them back to today’s terms. For Novo Nordisk, this approach begins with its latest twelve-month Free Cash Flow, which stands at DKK 68.4 billion. Analysts provide direct estimates for the next few years, followed by further projections out to 2035 based on historical growth patterns.

Looking at the near future, Free Cash Flow is expected to nearly double in five years to DKK 137.2 billion by 2029. Over the next decade, recent projections suggest annual cash flows could climb to around DKK 208.7 billion by 2035, with incremental growth rates tapering modestly in the long run. All numbers are provided in Danish kroner (DKK).

After discounting these future figures back to present value, the DCF model arrives at an intrinsic value of DKK 1,132.96 per share. This is significantly higher than the current share price of DKK 362.45, indicating that Novo Nordisk trades at a 68.0% discount to its calculated fair value.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Novo Nordisk is undervalued by 68.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Novo Nordisk Price vs Earnings

For profitable companies like Novo Nordisk, the Price-to-Earnings (PE) ratio is a tried and true way to assess whether a stock is expensive or cheap relative to its earnings power. PE ratios help investors gauge how much they are paying for each unit of company profit, and are particularly informative when the business has consistent and predictable earnings growth.

Growth expectations and risk profile each play a crucial role in deciding what constitutes a “normal” or “fair” PE ratio. Companies expected to grow faster or with lower risk typically command higher PE multiples, while slower-growing or riskier firms see lower ones. These benchmarks are usually set by looking at industry averages and direct peers, but every business is unique.

Currently, Novo Nordisk’s PE ratio sits at 14.5x. This is notably below the average PE for pharmaceutical industry peers (24.5x) and the peer group average (27.4x). While these comparisons are useful, they overlook important company-specific factors like profit margin, earnings growth, and overall risk.

That is where Simply Wall St’s proprietary Fair Ratio comes in. This tailored metric accounts for Novo Nordisk’s specific earnings growth, its profit margins, market cap, and its risk profile, giving a fuller and more nuanced picture than simple averages. Right now, Novo Nordisk’s Fair Ratio is 28.7x, more than double its current PE.

This gap between the Fair Ratio and Novo Nordisk’s actual PE suggests the stock is undervalued by this method as well, reinforcing signals from other valuation approaches.

Result: UNDERVALUED

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

Upgrade Your Decision Making: Choose your Novo Nordisk Narrative

Earlier, we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your own, story-driven forecast: it connects your perspective on Novo Nordisk, how you think its products, risks, and strategy will evolve, to financial estimates for things like future revenue, margins, and ultimately what you believe is a fair share price.

Narratives turn abstract numbers into actionable insights by linking the company’s story to real forecasts and fair value calculations, helping you test your view against the market. This tool is easy to use and available right on Simply Wall St’s Community page, where millions of investors publish, discuss, and update their Narratives as new news or earnings arrive so your thesis stays current.

When you create or follow a Narrative, you get a dynamic, personalized valuation that automatically updates as fresh information comes in. This helps you decide whether Novo Nordisk’s price offers an opportunity or signals it is time to wait. For example, while some investors see fair value as high as DKK 1,036, others build more cautious Narratives with targets closer to DKK 444, demonstrating how diverse perspectives shape investing decisions.

Do you think there's more to the story for Novo Nordisk? Create your own Narrative to let the Community know!

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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