Should You Be Adding Novo Nordisk (CPH:NOVO B) To Your Watchlist Today?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Novo Nordisk (CPH:NOVO B). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Novo Nordisk with the means to add long-term value to shareholders.

Check out our latest analysis for Novo Nordisk

How Fast Is Novo Nordisk Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Novo Nordisk's EPS has grown 30% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Novo Nordisk shareholders can take confidence from the fact that EBIT margins are up from 43% to 45%, and revenue is growing. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Fortunately, we've got access to analyst forecasts of Novo Nordisk's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Novo Nordisk Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a kr.4.3t company like Novo Nordisk. But we do take comfort from the fact that they are investors in the company. As a matter of fact, their holding is valued at kr.150m. This considerable investment should help drive long-term value in the business. Despite being just 0.003% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Does Novo Nordisk Deserve A Spot On Your Watchlist?

For growth investors, Novo Nordisk's raw rate of earnings growth is a beacon in the night. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Novo Nordisk (1 is significant) you should be aware of.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in DK with promising growth potential and insider confidence.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com