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Saturday, August 2, 2025

Novo Nordisk – 9 years later


Disclaimer: THIS IS NOT INVESTMENT ADVISE. PLEASE DO YOUR OWN RESEARCH.

9 years, three encounters

One of the great aspects of writing an online blog for a long time is that I can look back and find something I have written a long time ago which I would have otherwise long forgotten.

In Novo Nordisk’s case I have looked at the company almost exactly 9 years ago, mostly because Rob Vinall was invested back then (he sold since).

Initially I looked at them in August 2016 and then again a few months later when the share price had declined even further (There was a stock split of 2:1 in 2023, so the per share numbers in my old posts need to be divided by 2).

In the end, I did nothing, although my second post basically marked the low point in the stock price almost to the exact day.

What I clearly didn’t have on my radar back then was that in December 2017, the FDA approved Ozempic and with this the “age of weightloss drugs” began. My biggest mistake in hindsight was clearly, not to follow the stock further.

I did look briefly at Novo Nordisk during my “All Danish shares” series in 2022, but again, I did not understand the significance of the weight loss drugs.

The last time I encountered the company was in 2024 when I listened to excellent Acquired podcast (3 1/2 hours) on Novo Nordisk which I can highly recommend. At that time, the boom was in full swing.

Looking back, from my posts in 2016, the stock became (almost) a 10 bagger within the next 8 years before the recent drop started. My main mistake was clearly not to follow up on the company but forgetting about it from 2016 to 2022.

Looking at the overall numbers right now, Novo looks quite cheap:

This time, we see a P/E multiple of 12,4 compared to 18,8 back then (and 35 times in 2022).The current dividend yield stands at 4,3 % and they bought back +1-2% of outstanding share p.a. in the past years.

Although they significantly lowered expectations a few days ago, the growth rate fo 2025 is still much better than most of the other European companies:

If we would just take the midpoint of the operating profit growth at +13%, we are almost at an “expected return” of close to 20%.

Also from TIKR, two interesting graphs:

The EBIT margin has increased significantly over the past two decades:

Whereas Return on Capital seems to have peaked already in 2016 and is heading downwards since then, but still at very healthy levels:

Both, trailing P/E and forward P/E are at the lowest level in TIKR history:

One interesting coincidence is that back then in 2016, they announced a new CEO which now is going to be replaced by a new one in an “Accellerated succession”.

Risks & Opportunities:

Just reading the general press, the main issues for Novo Nordisk are currently:

  1. Trump (Tariffs, pressure on drug prices)
  2. Competition (ElyLilly, “Compunding”

On the plus side, it seems that GLP-1 drugs seem to have so many positive attributes (plus some negatives) that there is a potential opportunity for more areas of application and of course a global roll out.

I also want to mention a comment that a “trusted commentator” made on my blog:

So it seems that at the moment, Eli Lilly seems to have overtaken Novo in their core product.

Looking at the share price of the last 5 years, we can clearly see that Eli Lilly has held up much better than Novo:

With a P/E of 29x (NTM), Eli Lilly is also much more expensive.

On the other hand, many large Pharmaceutical companies are very cheap at the moment, most likely driven by the uncertainties in the US which for all players is clearly the largest profit pool by a wide margin.

This here is a peer group comparison from TIKR:

As we can see, Eli Lilly is clearly an outlier. Pharma is really cheap.

What to do now ?

Novo Nordisk is clearly a high quality company with a long history. They clearly face significant challenges right now (competition, Trump), but in the past, these situations were opportunities to buy the stock.

In addition, their main product already has a profound impact on the lives of many people, especially with regard to their consumption behaviour. There seems to be a strong indication that people using GLP-1 drugs consume significantly lower amounts of packaged food, alcohol and cigarettes. So watching the further development makes sense for a significant part of the stock market universe.

On the other hand, especially in recent years, a stock which is falling will fall for a very long time. Catching falling knives has never been easy, but subjectively it has become even harder now.

Nevertheless, I do believe that the stock at the current valuation deserves some attention.

In order to motivate myself to keep looking, I bought a 0,5% position at current prices (~42 EUR per share).

Appendix:

Although this is clearly not a stock pitch, I nevertheless wanted to provide a soundtrack. Who would be fitting better to Novo Nordisk than Fat Boy Slim ?

Fatboy Slim – Praise You [Official Video]

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