Don't overlook NYSE:NVO—a stock with solid growth prospects and a reasonable valuation.

Last update: Sep 22, 2023

NOVO-NORDISK A/S-SPONS ADR (NYSE:NVO) was identified as an affordable growth stock by our stock screener. NYSE:NVO is showing great growth, but also scores well on profitability, solvency and liquidity. At the same time it seems to be priced reasonably. We'll explore this a bit deeper below.

Analyzing Growth Metrics

ChartMill assigns a Growth Rating to every stock. This score ranges from 0 to 10 and evaluates the different growth aspects like EPS and Revenue, both in the past as in the future. NYSE:NVO scores a 8 out of 10:

NVO shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 34.64%, which is quite impressive.
NVO shows quite a strong growth in Earnings Per Share. Measured over the last years, the EPS has been growing by 9.69% yearly.
NVO shows a strong growth in Revenue. In the last year, the Revenue has grown by 28.03%.
NVO shows quite a strong growth in Revenue. Measured over the last years, the Revenue has been growing by 9.64% yearly.
NVO is expected to show quite a strong growth in Earnings Per Share. In the coming years, the EPS will grow by 18.66% yearly.
The Revenue is expected to grow by 13.65% on average over the next years. This is quite good.
When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.
When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.

Analyzing Valuation Metrics

To assess a stock's valuation, ChartMill utilizes a Valuation Rating on a scale of 0 to 10. This comprehensive assessment considers various valuation aspects, comparing price to earnings and cash flows, while factoring in profitability and growth. NYSE:NVO has achieved a 8 out of 10:

Compared to the rest of the industry, the Price/Earnings ratio of NVO indicates a rather cheap valuation: NVO is cheaper than 83.09% of the companies listed in the same industry.
NVO's Price/Forward Earnings ratio is rather cheap when compared to the industry. NVO is cheaper than 81.64% of the companies in the same industry.
The average S&P500 Price/Forward Earnings ratio is at 19.01. NVO is valued slightly cheaper when compared to this.
Based on the Enterprise Value to EBITDA ratio, NVO is valued cheaper than 81.16% of the companies in the same industry.
87.92% of the companies in the same industry are more expensive than NVO, based on the Price/Free Cash Flow ratio.
NVO's low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company.
NVO has an outstanding profitability rating, which may justify a higher PE ratio.
A more expensive valuation may be justified as NVO's earnings are expected to grow with 27.32% in the coming years.

Evaluating Health: NYSE:NVO

ChartMill employs a unique Health Rating system for all stocks. This rating, ranging from 0 to 10, is determined by analyzing various liquidity and solvency ratios. For NYSE:NVO, the assigned 7 for health provides valuable insights:

An Altman-Z score of 6.61 indicates that NVO is not in any danger for bankruptcy at the moment.
With an excellent Altman-Z score value of 6.61, NVO belongs to the best of the industry, outperforming 85.02% of the companies in the same industry.
NVO has a debt to FCF ratio of 0.38. This is a very positive value and a sign of high solvency as it would only need 0.38 years to pay back of all of its debts.
NVO's Debt to FCF ratio of 0.38 is amongst the best of the industry. NVO outperforms 95.65% of its industry peers.
NVO has a Debt/Equity ratio of 0.21. This is a healthy value indicating a solid balance between debt and equity.
The current and quick ratio evaluation for NVO is rather negative, while it does have excellent solvency and profitability. These ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.

Evaluating Profitability: NYSE:NVO

ChartMill employs its own Profitability Rating system for stock evaluation. This score, ranging from 0 to 10, is derived from an analysis of diverse profitability metrics and margins. In the case of NYSE:NVO, the assigned 9 is noteworthy for profitability:

With an excellent Return On Assets value of 23.95%, NVO belongs to the best of the industry, outperforming 95.65% of the companies in the same industry.
Looking at the Return On Equity, with a value of 74.32%, NVO belongs to the top of the industry, outperforming 97.10% of the companies in the same industry.
Looking at the Return On Invested Capital, with a value of 55.96%, NVO belongs to the top of the industry, outperforming 99.03% of the companies in the same industry.
NVO had an Average Return On Invested Capital over the past 3 years of 49.65%. This is significantly above the industry average of 15.23%.
The 3 year average ROIC (49.65%) for NVO is below the current ROIC(55.96%), indicating increased profibility in the last year.
Looking at the Profit Margin, with a value of 33.40%, NVO belongs to the top of the industry, outperforming 96.62% of the companies in the same industry.
NVO has a better Operating Margin (42.80%) than 98.55% of its industry peers.
The Gross Margin of NVO (84.35%) is better than 87.44% of its industry peers.

Our Affordable Growth screener lists more Affordable Growth stocks and is updated daily.

For an up to date full fundamental analysis you can check the fundamental report of NVO

Disclaimer

This is not investing advice! The article highlights some of the observations at the time of writing, but you should always make your own analysis and invest based on your own insights.