The pharmaceutical industry is expected to grow steadily amid strong demand and government support. Therefore, fundamentally strong pharma stocks Novo Nordisk A/S (NVO), Novartis AG (NVS), and AbbVie Inc. (ABBV) could be wise additions to your portfolio now.
According to U.S. pharmaceutical industry statistics, the U.S. will have a 43.72% market share in the global pharma industry in 2023. Also, the U.S. is expected to spend $605 to 635 billion on medicine by 2025.
The global e-pharma market is expected to grow at 19.7% CAGR until 2029. Rising internet penetration globally, improved digitalization of healthcare services, and an increasing number of tech-savvy consumers are the primary factors driving market growth. Rising customer preference for online shopping, with a greater emphasis on convenience, is contributing to growth.
Furthermore, the global pharmaceutical market is expected to grow at 5.7% CAGR until 2028. Investors’ interest in pharma stocks is evident from VanEck Vectors Pharmaceutical ETF (PPH) 11.1% returns over the past nine months.
Take a detailed look at the stocks mentioned above:
Novo Nordisk A/S (NVO)
Headquartered in Bagsvaerd, Denmark, NVO is a global healthcare company engaged in the discovery, development, manufacturing, and marketing of pharmaceutical products. It operates through two business segments: Diabetes and Obesity care; and Biopharm.
In terms of forward non-GAAP PEG, NVO is trading at 1.79x, 15.9% lower than the industry average of 2.13x.
NVO’s trailing-12-month EBITDA margin of 46.13% is significantly higher than the industry average of 3.93%. Its trailing-12-month gross profit margin of 84.22% is 51.4% higher than the industry average of 55.64%.
For the fiscal first quarter that ended March 31, 2023, NVO’s net sales increased 26.9% year-over-year to Kr53.37 billion ($7.68 billion), while its operating profit came in at Kr17.09 billion ($3.59 billion), up 30.6% year-over-year. The company’s net profit and EPS came in at Kr13.59 billion ($2.85 billion) and Kr8.78, representing 39.4% and 41.2% increases year-over-year, respectively.
The consensus revenue estimate of $32.52 billion for the year ending December 2023 represents a 24.4% increase year-over-year. Its EPS is expected to grow 39.7% year-over-year to $5.04 for the same period. It surpassed EPS estimates in all four trailing quarters. NVO’s shares have gained 50.9% over the past nine months to close the last trading session at $158.32.
NVO’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
NVO has an A grade for Quality and a B for Value, Stability, Sentiment, and Growth. Within the Medical - Pharmaceuticals industry, it is ranked #3 out of 165 stocks. Click here for the additional POWR Ratings for Momentum for NVO.
Novartis AG (NVS)
Headquartered in Basel, Switzerland, NVS researches, develops, manufactures, and markets healthcare products worldwide through two segments: Innovative Medicines and Sandoz.
On May 4, 2023, Sandoz signed a distribution and collaboration agreement with Adalvo for exclusive rights to commercialize six products across key therapeutic areas of anti-infectives and oncology. Slated to launch in the mid-term of 2024, these products have a market size of approximately $3 billion, further advancing the Sandoz product pipeline in the key U.S. generics market.
NVS’ forward EV/EBITDA of 12.07x is 8.7% lower than the industry average of 13.21x. Its forward EV/EBIT of 12.63x is 24.3% lower than the industry average of 16.68x.
NVS’ trailing-12-month EBITDA margin of 35.60% is 805.6% higher than the industry average of 3.93%. Its trailing-12-month gross profit margin of 71.17% is 27.9% higher than the industry average of 55.64%.
For the fiscal first quarter that ended March 31, 2023, NVS’ net sales increased 3.4% year-over-year to $12.95 billion. Its operating income grew marginally from the year-ago value to $2.86 billion. During the same period, its net income and EPS came in at $2.29 billion and $1.09, representing 3.4% and 9% year-over-year increases, respectively.
Analysts expect NVS’ revenue to increase 53.2% year-over-year to $5.52 billion for the year ending December 2023. Its EPS is expected to grow 11.8% year-over-year to $6.8 for the same period. It surpassed EPS estimates in all four tailing quarters. The stock has gained 28.9% over the past nine months to close the last trading session at $97.78.
NVS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It is ranked first in the same industry. It has an A grade for Growth, Stability, and Quality and a B for Value, and Sentiment. To see additional NVS’ ratings for Momentum, click here.
AbbVie Inc.(ABBV)
Biopharmaceutical company ABBV engages in the research, development, manufacturing, commercialization, and sale of medicines worldwide. The company’s products are segmented into Immunology; Oncology; Anaesthetics; Neuroscience; Eyecare; Women’s Health; and Others.
ABBV’s forward EV/EBIT of 11.79x is 28.3% lower than the industry average of 16.68x. Its forward EV/EBITA of 11.55 is 12.6% lower than the industry average of 13.21x.
ABBV’s trailing-12-month EBITDA margin of 52.03% is significantly higher than the 3.93% industry average, while its trailing-12-month gross profit margin of 70.96% is 27.5% higher than the industry average of 55.64%.
ABBV’s global net revenues from the neuroscience portfolio increased 13.9% year-over-year to $1.70 billion for the first quarter ended March 31, 2023. The company’s total net revenues and adjusted EPS of $12.23 billion and $2.46, respectively.
Street expects ABBV’s EPS to increase marginally year-over-year to $11.1 for the year ending December 2024. It surpassed EPS estimates in three of four trailing quarters. Over the past month, the stock has gained marginally to close the last trading session at $137.25.
It’s no surprise that ABBV has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade for Quality and a B grade for Growth, Value, and Sentiment. It is ranked #2 in the same industry.
Beyond what is stated above, we’ve also rated ABBV for Stability and Momentum. Get all ABBV ratings here.
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NVO shares were trading at $157.25 per share on Friday afternoon, down $1.07 (-0.68%). Year-to-date, NVO has gained 16.85%, versus a 16.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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