To The Moon

$Novo-Nordisk A/S(NVO)$

If you’ve been keeping an eye on the European markets, you’ll know they have outperformed the U.S. year to date—just like the Chinese markets. Looking at year-to-date performance, China, Germany, and France have seen significant gains. In Europe, the biggest winners have been defense companies like Rheinmetall, BAE Systems, and Rolls-Royce.

Meanwhile, in the U.S., the Dow Jones, S&P 500, and Nasdaq are all down year to date. However, looking at a five-year performance, U.S. markets have comfortably outperformed their European counterparts. Currently, I don’t hold any European stocks in my portfolio, but I do own one Chinese stock—Alibaba. Previously, I held two, including Pinduoduo.

At the end of 2024, we discussed European and Chinese stocks, suggesting that 2025 might be the year of the contrarian trade—a prediction that seems to be playing out. Europe boasts strong companies like ASML, LVMH, defense giants, L’Oréal, Ferrari, and Novo Nordisk—the focus of this video.

Novo Nordisk faced a significant decline last year due to results that didn’t meet Wall Street’s expectations or the high end of the company’s guidance. However, I still believe it’s an excellent company, and at around $80, it could be worth reconsidering.

For those who prefer a more established name, Novo Nordisk could be a solid option.

Earning Overview

Novo Nordisk Stock Performance

Currently, Novo Nordisk trades at around $80–$83 pre-market, with a market cap of approximately $354 billion. Year to date, the stock is down 4%, but over the past three years, it’s up nearly 50%, and over five years, it has gained 218%. Revenue is expected to grow at 19.5% annually over the next two years, with EPS projected to rise 23.2%—a strong growth rate on both fronts.

Fundamental Analysis

Revenue Breakdown: Strong U.S. Growth with Potential in China and India

The bulk of Novo Nordisk’s revenue comes from the U.S., which has experienced rapid growth, followed by Europe, the Middle East, Africa, China, and the rest of the world. Both China and India are expected to be strong growth markets in the future, particularly as Novo Nordisk expands its offerings in these regions.

Business Fundamentals Remain Strong zooming out, gross profit margins have remained stable at around 84–85%, and revenue has grown steadily. The dip in free cash flow margin to 25.4% in fiscal 2024 was due to increased capital expenditures, as the company expands production and hiring. Since 2019, the number of employees has risen by 78.7%, but revenue per employee has also grown, reflecting increased efficiency.

A major driver of Novo Nordisk’s growth has been Ozempic and Wegovy, which have seen extraordinary compound annual growth rates—98.1% since 2018 for Ozempic and 236.2% since 2021 for Wegovy. While this level of growth may not continue, I believe strong, sustained growth is still possible.

Recent Revenue Per Employee Trends

Revenue per employee has grown significantly in recent years, reflecting strong demand for its GLP-1 drugs (Ozempic, Wegovy, Rybelsus) and operational efficiency. As of the latest data: Total Employees: Increased 78.7% since 2019. Revenue Per Employee: Has risen steadily despite workforce expansion.

High-Margin Products: Novo Nordisk’s GLP-1 drugs command premium prices, leading to strong revenue generation per worker. Increased Automation & Efficiency: Investment in manufacturing expansion and digital transformation is improving operational leverage. Scaling Without Proportionate Hiring: While the workforce has expanded, revenue growth has outpaced employee growth, improving productivity metrics.

Guidance

Looking at future growth, while free cash flow dipped in fiscal 2024, it is expected to grow at over 20% annually in the coming years, nearly doubling from $10.2 billion to over $20 billion in just three fiscal years.

Expansion in China & India: As Novo Nordisk expands in these markets, revenue per employee could continue rising. Potential Margin Expansion: Once recent CapEx investments (new manufacturing facilities) stabilize, operating efficiency could improve further. Continued Demand for GLP-1 Drugs: Strong sales in diabetes and obesity drugs will likely keep revenue per employee on an upward trend.

Free Cash Flow

With free cash flow expected to recover and grow significantly in the coming years, the company remains well-positioned for long-term success.

Fiscal 2024: Novo Nordisk’s free cash flow declined due to increased capital expenditures (CapEx) as the company expanded production and hired more employees. Future Growth: Analysts expect FCF to double over the next three years, from $10.2 billion in FY24 to over $20 billion by FY27. Annual Growth Rate: Free cash flow is projected to grow at 20%+ per year in the coming years.

Cash Flow Margins

Historically, free cash flow margins have been strong, but in FY24, they dipped to ~25.4%, largely due to CapEx investments. As investments slow down, margins are expected to improve, boosting profitability.

Novo Nordisk uses its cash flow for:

• R&D investments in next-gen treatments

• Expanding production capacity

• Dividend payouts and share buybacks

Technical Analysis

Technical Analysis: Support Levels and Momentum

A few weeks ago, when the stock was around $80, it was oversold on the weekly chart. Now, it's moving above the 20-day moving average, with $77–$80 acting as a strong support level. Buyers seem to step in at these levels.

Risks and Challenges

Regulatory & Approval Risks

Drug Approval Uncertainty: Novo Nordisk’s growth relies heavily on GLP-1 drugs (Ozempic, Wegovy, etc.), which require regulatory approvals in different countries. Delays or rejections could impact revenue projections. Pricing & Reimbursement Issues: Governments and insurers may impose stricter pricing regulations, limiting the company’s ability to charge premium prices.

Competition in GLP-1 Market

Rising Competition: Companies like Eli Lilly (Mounjaro, Zepbound) and potential new entrants (Pfizer, Amgen) are aggressively expanding in the weight-loss and diabetes drug space. Market Saturation Risk: While the obesity drug market is booming, at some point, growth could slow as competition increases and new treatments emerge.

Legal & Patent Risks

Patent Expiry Concerns: As patents on key drugs expire, competitors could introduce biosimilars or generic versions, cutting into Novo’s market share. Litigation Risks: Pharma companies often face lawsuits related to drug safety, pricing, or patent disputes. Any major lawsuit could negatively affect stock performance.

Valuation

Valuation: Cheaper Than Historical Averages

From a valuation standpoint, its forward P/E ratio is about 20, compared to its four-year average of 30. Other valuation metrics, like price-to-free cash flow and price-to-sales, also indicate it is trading below historical averages.

Reverse DCF Analysis To assess whether Novo Nordisk is overvalued or undervalued, a reverse discounted cash flow (DCF) model was used.

Key inputs:

• Trailing 12-month free cash flow

• Terminal growth rate

• Discount rate

• Dilution rate (assumed 2%)

The analysis indicates that the implied growth rate needed to justify today’s stock price is ~7.2–7.4%. However, since free cash flow is expected to grow above 20% in the next few years, this suggests the stock may be undervalued.

Potential Upside Based on Growth Assumptions

• If free cash flow grows at 12% annually, the stock should be 47% higher than its current price.

• With a 3% dilution assumption, the stock should be 33.4% higher than today’s levels.

Market sentiment

Novo Nordisk’s Recent Clinical Trial Results

On March 10th, Novo Nordisk announced the headline results from the REDEFINE 2 trial, a 68-week Phase 3 efficacy and safety study as part of their global REDEFINE program. This trial investigated once-weekly CagriSema, a fixed-dose injectable combination therapy, comparing its effects to a placebo. The study included 1,264 participants with obesity or overweight and type 2 diabetes, with an average baseline body weight of 102 kg.

Trial Results: Significant Weight Loss Achieved

The results showed that participants taking CagriSema lost significantly more weight than those on a placebo. If all participants followed the treatment perfectly, the average weight loss was:

• 15.7% for the CagriSema group

• 3.1% for the placebo group

Even when factoring in imperfect adherence, the results remained strong:

• 13.7% average weight loss for the CagriSema group

• 3.4% for the placebo group

Additionally, nearly 90% of participants on CagriSema lost at least 5% of their body weight, which is considered a clinically meaningful amount.

Regulatory Approval Plans and Market Reaction

Novo Nordisk announced plans to submit the drug for regulatory approval in early 2026, with more details to be shared at upcoming medical conferences. Despite the strong clinical results, the stock price dropped because Wall Street’s expectations were higher. However, Novo Nordisk itself was satisfied with the outcome.

Long-Term Perspective on Novo Nordisk’s Growth

Market reactions to small percentage deviations (e.g., a 2-3% difference in expectations) are common, but the key questions remain:

1. Is the drug effective for weight loss? Yes.

2. Does it help with Type 2 diabetes? Yes.

3. Will it be affordable? Yet to be determined.

4. Are side effects manageable? Important to consider.

The long-term potential for Novo Nordisk remains strong, and short-term volatility could provide buying opportunities.

Viking Therapeutics: Upcoming Phase 2 and 3 Trials

Switching to Viking Therapeutics, their Phase 2 trial results for their oral GLP-1 drug are expected in the second half of 2025, followed by Phase 3 results for their injectable version. Investors will be watching closely.

Conclusion

Despite experiencing massive past growth, Novo Nordisk still has significant growth potential—especially now that the company is transitioning from its investment phase into a more profitable expansion phase. Even though I see Novo Nordisk as an exceptional company, I do not currently own it—not because it’s not a great investment, but because I have other portfolio priorities and limited cash to invest.

What Do You Think? Are you buying, selling, or holding Novo Nordisk?

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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