Novo Nordisk Stock Isn't a Bargain. Here's Why You Should Buy It Anyway.
Unless you've been living under a rock, you've probably heard of Novo Nordisk's (NYSE: NVO) blockbuster weight-loss drug Ozempic. And if the enthusiasm continues, the company could be making money from it (and similar follow-on therapies) for many years to come. That very narrative is a big part of the reason why Novo's stock is pricey at the moment. But it's worth buying anyway. Here's why.
The biggest stumbling block for investors considering Novo Nordisk stock is its valuation. Its price-to-earnings (P/E) multiple is 40, whereas the average P/E for the pharmaceutical industry is 23. The implied question here is whether Novo will be able to grow its earnings close to twice as fast as the average of its competitors.
If it can, it's a point in favor of purchasing it since it's often necessary to pay a premium for quality. On the other hand, if the valuation reflects more hype than sound fundamentals, the market could dump the stock after a few bad earnings reports. So does its growth trajectory warrant its valuation?
Source Fool.com