Shares of healthcare giant Novo Nordisk (NVO)have been on an absolute tear in the last year, rising 68.9% in the last 12 months. Valued at a market cap of $579 billion, Novo Nordisk has returned over 7,800% to shareholders, after adjusting for dividends, since March 2004. 

Novo Nordisk is engaged in the research and development, manufacture, and distribution of healthcare products in Europe and other international markets. It has two primary business segments: Diabetes and Obesity Care, and Rare Diseases. 

Trading near all-time highs, Novo Nordisk stock has delivered game-changing returns to shareholders. Let’s see if it still makes sense to buy the stock at the current valuation.

What's Driving Growth at Novo Nordisk?

Just this month, the U.S. Food and Drug Administration (FDA) approved Novo Nordisk’s weight-loss drug, Wegovy, for another indication. Now, Wegovy can be used to reduce cardiovascular risk in overweight patients, unlocking another revenue stream for the company's blockbuster obesity treatment.

In addition to Wegovy, which is an injection, Novo Nordisk is working on a weight-loss pill that has displayed encouraging results in clinical trials. According to the clinical trial data, the pill can reduce your weight by 13% over 12 weeks, compared to a 6% loss in weight for Wegovy. 

Despite its massive size, Novo Nordisk increased sales by 36% year-over-year to $33.7 billion in 2023. The key revenue driver for Novo Nordisk was Wegovy, which accounted for 13.5% of total sales. In the last 12 months, Wegovy sales have surged by an emphatic 420%. 

Novo Nordisk says there are more than 800 million people in the world who are obese. Comparatively, just 2% of these patients are undergoing treatment, providing the pharma giant with plenty of scope to grow its sales in the upcoming decade. 

Novo's Big-Ticket Acquisition

Earlier this week, Novo Nordisk announced plans to acquire Cardior Pharmaceuticals for $1.1 billion. The deal includes additional payments if certain development and commercial milestones are achieved.

Cardior is involved in the discovery and development of therapies that target RNA (ribonucleic acid) to prevent, repair, and reverse heart diseases. The acquisition agreement includes Cardior’s lead compound, CDR132L, which is in phase 2 clinical development to treat heart failures. CDR132L is designed to halt or reverse cellular pathology by blocking abnormal levels of the microRNA molecule, leading to improvement in heart function. 

The acquisition will help Novo Nordisk establish a presence in cardiovascular disease as it aims to build a portfolio of therapies and address unmet needs within this vertical. Novo Nordisk expects the acquisition to close in Q2 of 2024, and the deal is not expected to adversely impact the company’s operating profit outlook for 2024.

Novo Nordisk ended 2023 with $30 billion in cash, and can easily fund the acquisition.

What Is the Target Price for Novo Nordisk Stock?

Analysts tracking Novo Nordisk expect sales to rise by 23.5% to $41.77 billion in 2024, and by 18.2% to $49.4 billion in 2025. Adjusted earnings are forecast to expand from $2.71 per share in 2023 to $3.37 per share in 2024, with continued growth to $3.97 per share in 2025. 

Priced at 38 times forward earnings, Novo Nordisk stock is expensive - but it's also on track to expand earnings by more than 40% in the next two years. 

Out of the 12 analysts covering Novo Nordisk stock, six recommend “strong buy,” one recommends “moderate buy,” two recommend “hold,” and one recommends “moderate sell.” The average target price for NVO stock is $142.25, about 10.2% higher than Monday's closing price.