Novo Nordisk is looking quite attractive at a record low P/E multiple of just 10x earnings with a dividend yield of 5%.
I had originally recommended Novo Nordisk and bought it for over $120 in 2024, and subsequently exited at a loss.
The valuation is looking interesting at 10x earnings and 3.5x sales, and the market cap of Novo has shrunk to just $158Bn. However, bear in mind, in 2026 earnings and sales are expected to decline 8% and 10% respectively, before resuming single-digit growth from 2027. But forecasts have been continuously wrong in the past two years, so investors are right in having misgivings.
For starters, the obesity market is still expected to grow 15-20% annually for the next 5 years, vastly untapped potential, so Novo will benefit, but because now supply is normalizing, prices will come down. Lilly executed much better and took advantage of good pricing even with pressure from generic compounders, where patients were willing to pay out of pocket.
This is also becoming a subscription monthly model, which is good and recurring but less profitable
Lilly was also better than Novo in cracking down on compounding loopholes, and abuses - for example, a compounder could sell you a generic version if the dosage was customized for specific patients, or if the patient had an allergy to a certain ingredient.
I believe these crackdowns will get better, but for the most part Novo has missed the cream. We are now seeing a transition into a normalized phase, where volumes will continue to grow as we get more pills and fewer injections. Wegovy (Novo) has been faster than Lilly in oral doses, Lilly’s approval is expected in May 2026.
I think going forward, pricing, access (like insurance coverage), and go-to-market execution will be key for success.
The price is attractive for sure, but my expectations are also low, 8-10% return a year, but the dividend yield at 5% is also a big plus. One can buy in installments, I don’t expect much traction in 2026. Lilly is overpriced.
