A Shot for your Portfolio: Analyzing Novo Nordisk

Ticker: NVO
Sector: Healthcare
Industry: Biotechnology
Headquartered: Denmark
Moat: Wide – Intangible Assets, Scale, Distribution

Action at date of this post

Accumulate as of 05.11.2024
This is technically a buy opinion. Accumulate means if you are an investor that buys periodically then keep buying. If you do not own it, but are looking to buy, this is an indication to open a position of no more than 25% of your intended, total position then accumulate shares over a set time frame.

Fair Value Analysis

I do a fair value analysis on every stock in two ways. The first is the Discounted Cash Flow (DCF) method which I use for most stocks. I also run the Peter Lynch Fair Value method on stocks as well. I like running both as there are times where one way is more meaningful than the other depending on the stock.

Novo Nordisk Corporate Overview

Novo Nordisk is a global healthcare company focusing primarily on diabetes care. Founded in Denmark in 1923, it has since grown into a leader in diabetes treatment, offering a wide range of insulin products, oral antidiabetic agents, and other related medications. Additionally, the company has expanded its portfolio to include treatments for obesity, hemophilia, growth disorders, and other chronic conditions.

With a strong emphasis on research and development, Novo Nordisk invests heavily in innovative therapies and technologies to improve the lives of patients worldwide. Their commitment to sustainability is evident in their efforts to minimize environmental impact and promote social responsibility throughout their operations.

Driven by a mission to defeat diabetes and other serious chronic diseases, Novo Nordisk continues to pioneer advancements in healthcare, striving to make a positive difference in the lives of millions of people globally.

Novo Nordisk Segment Analysis

The company operates in two segments: Diabetes & Obesity Care (93%) and Rare Diseases (7%).

Novo Nordisk Moat Source

Novo’s wide moat stems from it’s healthy portfolio and pipeline and associated intangible assets. In addition, the shear scale of the company means they can out spend smaller rivals. The cost of clinical trials, manufacturing and sizable distribution network keeps many rivals out of competition.

Novo Nordisk Growth Outlook

At 101 years old, Novo owns 32% of the global diabetes treatment market. This is far and away the largest share by any single company. In addition, Novo has 50% of the insulin market. In the insulun realm, Novo continually innovates its pipeline to ensure its treatments are patent protected.

With a strong R&D spend, Novo stays on top of refreshing its pipeline which helps keep smaller drug makers out of competition.

70% of global revenue comes from the US. Considering the obesity levels in the US, diabetes prevalence and the aging population, the demographics play well into the company’s hand. Needless to say, GLP1 and weight loss treatment, Wegovy, are the current growth drivers. What appears to be an ever expanding amount of use cases for the technology behind GLP 1 may very well be a growth driver in itself.

The Numbers

Please note the numbers below are in Danish Kroner and not USD. Management effectiveness is high considering the enviable ROIC and ROCE. The balance sheet is in great shape and cash is being converted at very high levels. This is a company that profits greatly from its moat. Consistent earnings growth and strong free cash means the company and continue to pour money into R&D.

This website and associated newsletter along with its content/links are not financial advice. Nothing in this newsletter is an investment recommendation. All content is created for entertainment, educational, or informational purposes only. My strong buy, accumulate, hold, reduce or sell opinions are exactly that – opinions. Be sure to do your own research for your own particular circumstances or higher a professional advisor.

At the time of writing this post, the author does have a position in NVO.