The stock of European pharmaceutical giant Novo Nordisk (NVO) is cheap at current levels and offers shareholders a hefty dividend yield of nearly 5%.
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NVO stock has fallen more than 40% in the last 12 months on concerns that its weight-loss drugs are losing ground to archrival Eli Lilly (LLY). That decline has Novo Nordisk’s stock trading at just 10 times this year’s earnings estimates, which is less than half the valuation of the average stock listed in the S&P 500 index.
The share price drop has boosted the dividend yield on NVO stock to a 4.65%, about four times the average dividend yield among S&P 500 constituents. Novo Nordisk pays a quarterly dividend of $0.45 per share, or $1.80 a year. By comparison, LLY stock is currently trading at price-to-earnings ratio of 40 and has a dividend yield of 0.74%.
Reasons for Optimism with NVO Stock
Despite the big pullback in NVO stock over the past year, there are reasons to be optimistic that the share price will recover. First, the company launched its new Wegovy weight-loss pill in January of this year and indications are that it is selling well globally.
Second, on April 14, Novo Nordisk announced that it is partnering with OpenAI to advance artificial intelligence (AI) drug discoveries. The partnership will enable Novo Nordisk to use AI to analyze complex datasets, identify promising new drugs, and reduce the time it takes for medicines to reach patients.
Is NVO Stock a Buy?
Novo Nordisk’s stock has a consensus Hold rating among eight Wall Street analysts. That rating is based on one Buy and seven Hold recommendations issued in the last three months. The average NVO price target of $43 implies 10% upside from current levels.
