Yes, the proportion of Novo Nordisk (WKN: A1XA8R) continues to be on the road to success. At the end of the week, the share certificates went out of trading at a share price of 112 euros. It is, of course, high, the stock defensive. It has pricing power and qualities as a market leader. Nevertheless, the performance is one that leads to dizzying heights in these times.
In the meantime, the question is whether everything is still fundamentally in order. This question has already been asked at a stock price of 100 euros and sometimes also at 80 or 90 euros. Let us review what we should take with us at this point. In any case, the expectations for me are very, very high.
Novo Nordisk: Is everything fundamentally green?
In any case, the Novo Nordisk share is now traded at a share price of DKK 837. To clarify this connection as well: we must definitely take the weak euro into account in the assessment. In any case, the 2021 exchange rate-earnings ratio in the home currency is now around 38. If we think more optimistically, the value for 2022 would probably be around 34.9. However, both values are not necessarily cheap. Especially since the dividend yield of only 1% is very, very close to the target.
But it’s not just about the key figures, it’s about the context. The management of Novo Nordisk can now ideally utilize their own pricing power. For example, in the first quarter. Revenue increased 24%, while operating income increased 28% year over year. With an earnings per. share of 14% we can see that production costs can increase. But management can certainly do something to counteract current inflation.
So is the Novo Nordisk share completely green? Hard to say: If growth continues this year and the next three, we could make that argument. But precisely this if is the big question mark.
Priced for perfection
I therefore stand by my assessment: the Novo Nordisk share is trading high and is expensive. The underlying group is a more mature company that has been a leader in diabetes treatment for more than nine decades. The growth is solid and clearly double-digit. However, I still believe that this stock should be valued more as a quality stock than a long-term growth stock.
A slight deviation from strong growth at Novo Nordisk may cause a reaction in the share price. Of course, it is possible that growth will remain perfect. Nevertheless, we as idiots need to calculate the risk-reward ratio. To be honest, I would feel much more comfortable if the valuation was around a price-to-earnings ratio of 20 to 25. Especially if I were to consider buying this stock now with a corporate and long-term orientation.
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Vincent owns shares in Novo Nordisk. The Motley Fool recommends shares in Novo Nordisk.