1 Growth Stock Down 40% to Buy and Hold Forever

3 months ago 37

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Prosper Junior Bakiny, The Motley Fool

Thu, Mar 27, 2025, 7:00 AM 5 min read

This mightiness astonishment some, but Danish pharmaceutical elephantine Novo Nordisk (NYSE: NVO) has importantly lagged the marketplace successful the past year. The drugmaker's shares are down by 40% implicit the trailing-12-month period, contempt grabbing headlines for its enactment successful the red-hot value absorption cause market.

Novo Nordisk has faced immoderate issues, but adjacent taking those into account, the company's prospects stay excellent. Long-term investors tin inactive safely adhd this banal to their portfolios and clasp it for for the agelong term.

Novo Nordisk's astir celebrated GLP-1 medicines, Wegovy and Ozempic, are helping thrust coagulated top-line growth. In 2024, the company's nett income accrued by 25% twelvemonth implicit twelvemonth to 290.4 cardinal Danish kroner ($42 cardinal USD). That would beryllium an fantabulous show for astir drugmakers of this size and would apt pb to a beardown banal marketplace show for the year.

However, Novo Nordisk encountered 2 main issues past year. First, overmuch of the occurrence related to its GLP-1 therapies -- its astir important maturation drivers -- was already somewhat baked into its banal price. However, contempt appearances, they did not execute arsenic good arsenic expected, disappointing investors.

Second, 1 of Novo Nordisk's starring pipeline candidates failed to sound things retired of the park. The institution is processing CagriSema arsenic a value absorption medicine. In December, Novo Nordisk reported that CagriSema helped patients lose, connected average, 22.7% of their assemblage value successful a signifier 3 study. That would person been an fantabulous show for the investigational medicine, if not for the information that Novo Nordisk's absorption was shooting for an mean of 25% value nonaccomplishment successful the trial.

The institution missing its ain projection, coupled with the much analyzable (and expensive) manufacturing process for CagriSema versus different GLP-1 leaders, sent Novo Nordisk's banal terms down by astir 20% in a azygous trading session.

Despite these headwinds, determination is inactive hope. Amid these troubles, Novo Nordisk's valuation has go much reasonable. The stock's guardant price-to-earnings (P/E) was supra 40 astir a twelvemonth agone but present stands astatine 18.8.

NVO PE Ratio (Forward) information by YCharts

The mean for the healthcare manufacture is 17.4. Novo Nordisk mightiness beryllium a bargain astatine these levels, considering its lasting successful the pharmaceutical manufacture -- peculiarly successful its halfway therapeutic areas. Novo Nordisk has been a person successful the diabetes cause marketplace for decades. As of November, it held a 44% stock of the planetary insulin market, though that's a flimsy alteration from the 45.3% stock it had successful November 2023 (it tends to spell up and down).