Where will Novo Nordisk’s share be in 10 years?

The proportion of Novo Nordisk (NASDAQ: AAPL) is trading pretty high right now. The share price is again at a relatively high level of 103 EUR. Foolish investors know that it puts its price-to-earnings multiple well into its 30s and its dividend of just over 1%.

The key question is: What will Novo Nordisk achieve over a period of ten years? To grow into or beyond your own evaluation? Let us calculate very conservatively whether the stock could be a purchase. Or whether the risks outweigh the risks.

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Novo Nordisk: Ten years from now!

The Novo Nordisk share at least has a good, timeless business model. With the diabetes market and a leading competitive position, there is stability and the opportunity to benefit from moderate growth. After all, the current forecasts assume that the number of cases will increase by 2045.

But let’s stay with the next few years: Novo Nordisk has a solid mix of different growth drivers. Blockbusters like Ozempic and Rybelsus, among others, should drive moderate growth. In times of inflation, management should be able to use some pricing power. New good products are probably also more expensive.

Although Novo Nordisk does not see earnings growth of up to 14% year-on-year in ten years and no revenue growth above the 20% mark, I conservatively expect 5% growth in earnings over a ten-year period. In this setting, management can increase earnings per. share for almost 35 Danish kroner according to my calculations. At a share price of DKK 776, the price-earnings ratio would then be 22.2. A very valuable insight.

Min take away!

Ten-year-old Novo Nordisk does not necessarily have to beat the market. We recognize that the current valuation may not lead to the major revaluation. At least not when earnings growth is 5% pa. It would be different if the management had to manage 10% pa. With a price-to-earnings ratio of then 14, valuation would be significantly cheaper.

The key question, however, is whether Novo Nordisk can do it. When I think conservatively, I do not necessarily see the chance that this proportion will remain the high-flyer. Nevertheless, solid, timeless returns seem to be possible in the long run. But the basic valuation suggests lots of earnings growth over the next many years. This means that the stock is under some pressure.

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Vincent owns shares in Novo Nordisk. The Broget Fool recommends Novo Nordisk.

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