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Novo Nordisk: Don't Be Fooled; This Stock Only Goes Up On Better-Than-Expected Results

Summary

Novo Nordisk plummeted on worse-than-anticipated results.

That shouldn't be misinterpreted as the firm showing poor results, because the firm performs outstandingly.

Unfortunately, not outstanding enough for institutional investors.

With Novo Nordisk already on top of its game with high profit margins, it's only going to be more difficult for it to climb.

Novo Nordisk (NYSE:NVO) has always been one of my favorite firms, which I've covered many times before on Seeking Alpha. Beginning of this year, I already gave notice that certain risks at Novo Nordisk shouldn't be ignored. And that, due to its incredible performance for decades, people's expectations might have outgrown the actual business performance of the firm. Please don't misinterpret this as me being a Novo Nordisk bear. I've been an extreme Novo Nordisk bull for nearly 10 years, but as I've discussed before, some risks are often neglected.

The positive side is that the firm is easy to understand, is above average when looking at investment performance, debt, profit margin and other metrics. This makes the firm a top contender for 'stocks to own' list, which makes it highly susceptible to minor financial bumps on the road. That is what happened recently:

Source: Seeking Alpha

Quickly, Seeking Alpha authors jumped on the boat covering why they picked it up after the last slump. But rather than the obvious open doors, I couldn't find any specific information regarding actual drivers of the stock, or what could potentially crash it through the $59 barrier (52-week high).

Source: Seeking Alpha

I realize that the 20% to 30% gain investors can make (current price in contrast to its 52-week high) by buying Novo Nordisk on the drop is lucrative, but many have bought in at the high $50s and have been waiting for a break out of the share price ever since.

In this article, I will shed a specific light on what exactly could drive this stock (and what does not). In specific, I try to shed another light on Novo Nordisk, rather than the obvious fundamental factors which are outstanding.

Novo Nordisk: Another Lower Guidance…

Novo Nordisk dropped significantly on a lower guidance. So far, over the last 2 years, the return on it has been next to nothing:

Even the market (Dow Jones) has had a better performance than Novo over the last 2 years.

The reason behind the current drop is a downwards revision. Now, reading through the majority of news articles, this is written off as a 'so-what' scenario. But is that fair?

Let's briefly touch upon the H1 results of 2016:

Source: H1 2016 Presentation Novo Nordisk

Source: H1 2016 Presentation Novo Nordisk

Sales grew by 7% in local currencies while adjusted operating profit increased by 8% in local currencies. These are high-single digit numbers and look great. The notification that sales growth has been revised downwards is not great news, but many seem to forget that investors have been anticipating this for a while. Novo Nordisk has been downwards revising its guidance for a while now; this is not...


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