When you look at NYSE:NVS, it's hard to ignore the strong fundamentals, especially considering its likely undervaluation.

Last update: Jan 31, 2025

Our stock screener has spotted NOVARTIS AG-SPONSORED ADR (NYSE:NVS) as an undervalued stock with solid fundamentals. NYSE:NVS shows decent health and profitability. At the same time it remains remains attractively priced. We'll dive into each aspect below.

How We Gauge Valuation for NYSE:NVS

ChartMill assigns a Valuation Rating to each stock, ranging from 0 to 10. This rating is calculated by analyzing different valuation elements, such as price to earnings and free cash flow, both in absolute terms and relative to the market and industry. In the case of NYSE:NVS, the assigned 8 reflects its valuation:

Based on the Price/Earnings ratio, NVS is valued cheaper than 90.86% of the companies in the same industry.
NVS is valuated cheaply when we compare the Price/Earnings ratio to 28.51, which is the current average of the S&P500 Index.
85.48% of the companies in the same industry are more expensive than NVS, based on the Price/Forward Earnings ratio.
When comparing the Price/Forward Earnings ratio of NVS to the average of the S&P500 Index (93.88), we can say NVS is valued rather cheaply.
Based on the Enterprise Value to EBITDA ratio, NVS is valued cheaply inside the industry as 84.95% of the companies are valued more expensively.
Compared to the rest of the industry, the Price/Free Cash Flow ratio of NVS indicates a rather cheap valuation: NVS is cheaper than 88.71% of the companies listed in the same industry.
The excellent profitability rating of NVS may justify a higher PE ratio.

Analyzing Profitability Metrics

ChartMill assigns a proprietary Profitability Rating to each stock. The score is computed by evaluating various profitability ratios and margins and ranges from 0 to 10. NYSE:NVS was assigned a score of 9 for profitability:

NVS's Return On Assets of 18.66% is amongst the best of the industry. NVS outperforms 98.39% of its industry peers.
NVS has a better Return On Equity (44.37%) than 96.77% of its industry peers.
With an excellent Return On Invested Capital value of 20.91%, NVS belongs to the best of the industry, outperforming 96.24% of the companies in the same industry.
The 3 year average ROIC (11.23%) for NVS is below the current ROIC(20.91%), indicating increased profibility in the last year.
The Profit Margin of NVS (35.25%) is better than 97.31% of its industry peers.
NVS's Profit Margin has improved in the last couple of years.
NVS has a Operating Margin of 30.55%. This is amongst the best in the industry. NVS outperforms 94.09% of its industry peers.
In the last couple of years the Operating Margin of NVS has grown nicely.
NVS has a better Gross Margin (74.99%) than 81.72% of its industry peers.

Looking at the Health

To gauge a stock's financial health, ChartMill utilizes a Health Rating on a scale of 0 to 10. This comprehensive evaluation encompasses liquidity and solvency, both in absolute terms and in comparison to industry peers. NYSE:NVS has earned a 7 out of 10:

An Altman-Z score of 3.90 indicates that NVS is not in any danger for bankruptcy at the moment.
With a decent Altman-Z score value of 3.90, NVS is doing good in the industry, outperforming 76.34% of the companies in the same industry.
NVS has a debt to FCF ratio of 2.07. This is a good value and a sign of high solvency as NVS would need 2.07 years to pay back of all of its debts.
With an excellent Debt to FCF ratio value of 2.07, NVS belongs to the best of the industry, outperforming 94.09% of the companies in the same industry.
A Debt/Equity ratio of 0.47 indicates that NVS is not too dependend on debt financing.
Even though the debt/equity ratio score it not favorable for NVS, it has very limited outstanding debt, so we won't put too much weight on the DE evaluation.
The current and quick ratio evaluation for NVS 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.

ChartMill's Evaluation of Growth

ChartMill assigns a proprietary Growth Rating to each stock. The score is computed by evaluating various growth aspects, like EPS and revenue growth. We take into account the history as well as the estimated future numbers. NYSE:NVS was assigned a score of 4 for growth:

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.

Every day, new Decent Value stocks can be found on ChartMill in our Decent Value screener.

Our latest full fundamental report of NVS contains the most current fundamental analsysis.

Keep in mind

Important Note: The content of this article is not intended as trading advice. It is essential to perform your own analysis and exercise caution when making trading decisions. The article presents observations created by automated analysis but does not guarantee any trading or investment outcomes. Always trade responsibly and make independent judgments.