Key Takeaways
- Novo Nordisk’s forward price-to-earnings multiple has contracted to approximately 13.9 times, a significant discount to its ten-year average of 24.3 times and its primary competitor, Eli Lilly.
- The valuation pressure follows revised full-year guidance, which lowered sales and profit growth expectations due to supply constraints for its key GLP-1 drugs, Ozempic and Wegovy.
- Despite guidance adjustments, the company reported robust first-half 2025 results, with sales growing 15% and operating profit up 17%, supported by a return on invested capital exceeding 50%.
- Key risks for investors include intensifying competition from Eli Lilly, persistent manufacturing bottlenecks, and an upcoming CEO transition, while long-term patent protection and a promising drug pipeline offer potential upside.
Novo Nordisk’s current share price reflects a forward price-to-earnings multiple that appears unusually compressed relative to its historical norms and sector peers, prompting a reassessment of its investment merits amid recent operational adjustments and market dynamics.
Valuation Metrics in Context
As of 30 July 2025, Novo Nordisk’s shares trade at approximately 13.9 times forward earnings estimates for 2025, a level that marks a significant departure from its decade-long average of around 24.3 times. This contraction follows the company’s announcement on 29 July 2025 of revised full-year guidance, lowering sales growth expectations at constant exchange rates to between 8% and 14%, down from a prior range of 12% to 18%. Operating profit growth was similarly adjusted to 10% to 16%, from 15% to 21%. These revisions stem from supply constraints and competitive pressures in the GLP-1 receptor agonist market, particularly for products like Ozempic and Wegovy.
Historical comparisons underscore the anomaly. Over the past ten years, Novo Nordisk’s forward price-to-earnings ratio has rarely dipped below 20 times, even during periods of regulatory scrutiny or patent challenges. For instance, in 2020, amid the initial disruptions of the global pandemic, the multiple averaged 22.4 times, supported by resilient demand for diabetes treatments. By contrast, the current valuation aligns more closely with cyclical sectors rather than a biopharmaceutical leader with a dominant position in insulin and obesity therapies.
Peer analysis provides further perspective. Eli Lilly, a direct competitor with its rival GLP-1 drugs Mounjaro and Zepbound, trades at around 45 times forward earnings as of the same date, reflecting investor optimism about its pipeline and market share gains. Sanofi, another player in diabetes care, sits at 14.2 times, but with lower growth prospects. Novo Nordisk’s multiple, therefore, suggests a potential undervaluation if earnings growth rebounds as anticipated, though it also embeds risks from intensifying competition and production bottlenecks.
Earnings Performance and Guidance Revisions
For the first half of 2025, Novo Nordisk reported sales of DKK 140.1 billion, equivalent to approximately USD 20.3 billion, representing a 15% increase at constant exchange rates compared to the first half of 2024. Operating profit rose 17% to DKK 62.4 billion (USD 9.0 billion) over the same period. These figures, while solid, fell short of some analyst expectations, contributing to the share price decline of about 20% on 29 July 2025.
Breaking down the second quarter (April to June 2025), sales reached DKK 78.1 billion (USD 11.3 billion), up 19% from the second quarter of 2024. Earnings per share stood at DKK 6.53, in line with consensus but highlighting margin pressures from increased research and development spending. The company’s obesity care segment, driven by Wegovy, grew 81% year-over-year in the quarter, yet supply limitations capped upside potential.
The guidance cut reflects ongoing challenges in scaling manufacturing capacity to meet demand for semaglutide-based therapies. Novo Nordisk has invested heavily in production facilities, with capital expenditures totalling DKK 15.2 billion in the first half of 2025, up from DKK 10.8 billion in the prior year period. Analysts project that resolution of these constraints could restore growth to the high teens by 2026, with earnings per share estimates averaging DKK 28.50 for that year, implying a forward multiple of 12.0 times at current prices.
Key Financial Metrics
| Metric | H1 2025 | H1 2024 | Change (%) |
|---|---|---|---|
| Sales (DKK bn) | 140.1 | 121.7 | 15 |
| Operating Profit (DKK bn) | 62.4 | 53.3 | 17 |
| Earnings Per Share (DKK) | 12.85 | 11.12 | 16 |
| Capital Expenditures (DKK bn) | 15.2 | 10.8 | 41 |
These metrics illustrate a business maintaining robust profitability, with return on invested capital exceeding 50% in the period, far above the biopharmaceutical industry average of 15-20%.
Market Sentiment and Competitive Landscape
Sentiment on platforms such as X has turned cautious, with discussions from accounts including StockSavvyShay noting the depressed multiples, though often tempered by concerns over the leadership transition announced alongside the guidance update. Lars Fruergaard Jørgensen will step down as CEO by early 2026, to be succeeded by an internal candidate, a move that introduces execution risks during a pivotal growth phase.
Broader market dynamics include escalating competition from Eli Lilly, whose products have demonstrated superior weight-loss efficacy in clinical trials, potentially eroding Novo Nordisk’s 60% share of the GLP-1 market as of mid-2025. Patent protections for semaglutide extend to 2032 in key regions, providing a buffer, but biosimilar entrants could pressure pricing post-expiry. On the positive side, Novo Nordisk’s pipeline includes promising candidates in rare diseases and cardiovascular indications, with phase III trials for amycretin—a next-generation obesity drug—expected to read out in late 2026.
Analyst forecasts, aggregated from sources like FactSet, project 2025 sales of DKK 310.5 billion (USD 45.0 billion), a 7% increase from 2024’s DKK 290.4 billion, with earnings per share of DKK 24.10. This implies a compound annual growth rate of 12% through 2027, assuming supply issues abate. At current valuations, the implied equity risk premium stands at 6.5%, higher than the 4.5% for the S&P 500 healthcare sector, suggesting room for multiple expansion if execution improves.
Investment Considerations
While the compressed valuation presents an entry point for long-term investors, it is not without caveats. The biopharmaceutical sector’s sensitivity to regulatory changes, such as potential U.S. price controls on obesity drugs, adds uncertainty. Novo Nordisk’s dividend yield of 1.8% as of 30 July 2025, based on a payout of DKK 11.40 per share in 2024, offers some downside protection, with expectations of a 12% increase to DKK 12.80 in 2025.
In summary, Novo Nordisk’s fundamentals remain strong, with high margins and a defensible market position, yet the recent multiple contraction warrants scrutiny of near-term risks versus growth potential. Investors should monitor upcoming earnings on 6 August 2025 for further clarity on supply resolutions and strategic priorities.
References
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Benzinga. (2024). *The Ozempic Effect: Is Novo Nordisk Stock A Buy After Pullback?*. Benzinga. Retrieved from https://www.benzinga.com/money/ozempic-novo-nordisk-stock-price-prediction
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