Shares of the Danish Novo Nordisk are really bad at the moment. 1) Of the 200 or so largest publicly traded companies in the world (so-called «megacaps»), according to the consensus of analysts, they are the most undervalued. In a year at this time, according to them, they should therefore be about 36% higher. According to analysts, only the shares of Xiaomi and Deutsche Telekom are more undervalued (see table 1, third column).
2) Five Novo Nordisk shares in the global «megacaps» range also offer double the dividend yield compared to the average (3.7% vs. 1.9%). Xiaomi shares have a zero dividend yield, while Deutsche Telekom has 3.3% (see Table 1, fourth column). 3) In addition, Novo Nordisk shares are now trading at 38.9% of the 52-week high. This is by far the least among global «megacaps». On average, the shares of the world's largest publicly traded companies are now trading at 90.1% of the 52-week high, after Novo Nordisk, United Healthcare shows the second largest drop compared to last year's high, only it is now at 54.2% of the 52-week high (see table 1, fifth column). 4) Novo Nordisk's closest competitor, at least according to the correlation of the share price (correlation coefficient 0.31 in the last two years), is the American Eli Lilly. While Novo Nordisk's share price is now at 12.6 times the average current and future earnings, Eli Lilly's shares are now at 29.2 times (see table 2).
The first sharp fall in the share to less than 40 percent of the maximum of the last twelve months is evident from the reason that investors are still deterred from Novo Nordisk shares. Extend the mental swing of decline into the future and fear further decline. Among the analysts, the buy recommendation dominates (see table 3), but they have recently been overtaken by a shake-up in the management of the company, which they do not understand both in terms of scope and timing. A new leader means certain uncertainty about the future of the company.
Luk Kovanda, Ph.D. Chief Economist, Trinity Bank