Does Novo Nordisk’s Latest Drug Trial Setback Signal a Chance for Investors in 2025?

If you are sitting at your desk right now wondering what to do with Novo Nordisk, you are definitely not alone. This is one of those stocks that keeps investors on their toes. Just look at that roller coaster of recent performance. Over the past seven days, Novo Nordisk fell by 4.5%, but it was up by 4.7% in the last month. Step back a bit more, and it gets even more interesting: year to date, the stock is down a hefty 35%, and over the last twelve months, it has dropped by 51.6%. Yet, if you zoom out to a three- or five-year view, the narrative shifts to one of impressive growth, with a 13.8% gain over three years and a striking 70.4% increase across five years.

These swings catch attention, but they also raise big questions: has the market overreacted to recent developments, or is there real cause for concern in the near term? Changes in the competitive landscape for diabetes and obesity therapies, as well as wider swings in pharmaceutical market sentiment, have certainly played a part in Novo Nordisk’s turbulent ride, making investors rethink both the risks and the opportunities here.

So where does valuation fit into all of this uncertainty and excitement? Novo Nordisk actually scores a 5 out of 6 on our comprehensive value check, signaling that it is undervalued on most fronts. But it is not enough to just count checks; we need to look under the hood and tackle each approach in detail. And even then, there is a more insightful way to understand what Novo Nordisk is worth, which I will get to 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 what a company is worth today based on projections of its future cash flows, which are then discounted back to their present value. For Novo Nordisk, the model uses a 2 Stage Free Cash Flow to Equity approach, focusing on how much cash the company can generate for shareholders in the coming years.

Currently, Novo Nordisk reports trailing twelve months Free Cash Flow (FCF) of DKK 68.4 billion. Analyst consensus points to steady growth, projecting FCF to reach DKK 136.1 billion by 2029. Over a 10-year horizon, forecasts (including a blend of analyst estimates through 2029 plus further extrapolation) suggest FCF could surpass DKK 219.9 billion by 2035. The DCF model runs these future figures through a discount rate to account for time and risk, arriving at today's intrinsic value.

Based on these calculations, the DCF intrinsic value for Novo Nordisk is DKK 158.59 per share. At current market levels, this implies the stock is trading at a 64.1% discount to its estimated fair value. This indicates a significant undervaluation according to this method.

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 64.1%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Novo Nordisk Price vs Earnings (PE)

The Price-to-Earnings (PE) ratio is a favored way to value established, profitable companies like Novo Nordisk because it directly ties stock price to the company’s earnings power. This approach gives investors a quick sense of how much they are paying for each dollar of profits, making it especially useful for mature businesses in steady industries.

What constitutes a “normal” or “fair” PE ratio can vary. If a company is expected to grow faster than average, it typically justifies a higher PE, while more risk or uncertain prospects can push that number lower. Comparing PE ratios across peers and industries can offer perspective, but these simple comparisons do not always capture the whole story.

Novo Nordisk’s current PE ratio stands at 15.1x. That is below the Pharmaceuticals industry average of 19.9x and also well under the peer average of 26.3x. On the surface, this suggests the stock is priced lower than many rivals when considering earnings. However, Simply Wall St’s proprietary “Fair Ratio” model, which adjusts for earnings growth, profit margins, market cap, industry and risk, calculates a fair PE for Novo Nordisk at 31.7x. This fair value takes into account more nuances than industry or peer averages, making it a more rounded benchmark.

Because Novo Nordisk’s actual PE is well below its Fair Ratio, it signals the market may be undervaluing the company relative to its true earnings potential and business quality.

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 is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is simply your own story about a company, combining the “why” behind your perspective with the numbers that support it, such as fair value, future revenue, earnings, and margins. Rather than relying solely on historical data or generic averages, Narratives help you tie together what you believe will happen, how that shapes financial forecasts, and ultimately what the stock’s fair value should be.

Narratives make investment decision-making more dynamic and personal, turning static valuation methods into an accessible, living tool built right into the Simply Wall St Community page. By having your Narrative, you can compare your calculated Fair Value with today’s market Price, making it easy to see whether it is time to buy, hold, or sell. As the company’s news or earnings roll in, your Narrative and fair value update automatically, so your outlook always stays fresh and relevant.

For example, on Simply Wall St’s platform, some investors currently have a bullish Narrative with a fair value as high as $160 per ADR for Novo Nordisk, while others take a more cautious view around $70. This allows you to see the full landscape of opinions and decide which story fits you best.

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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