NOVO-NORDISK A/S-SPONS ADR (NYSE:NVO) Emerges as a Top Affordable Growth Stock

Investors looking for growth opportunities without paying too much often use the Growth At Reasonable Price (GARP) method. This approach finds companies with good growth potential, solid financials and profitability, while also trading at prices that are not based on speculation. One way to find these companies is by using systematic screening tools that check stocks on several basic measures. NOVO-NORDISK A/S-SPONS ADR (NYSE:NVO) recently appeared on an “Affordable Growth” screen. This filter looks for companies with a growth rating higher than 7, good profitability and financial health, and a valuation score above 5, criteria that match the GARP method.

NVO’s basic profile, shown in its fundamental analysis report, indicates strong points in a number of important areas. The company’s growth rating of 7 is backed by solid revenue increase, with a 20.9% rise over the last year and an 18.94% compound annual growth rate in recent years. Future growth estimates stay positive, with predicted yearly EPS growth of almost 11% and revenue growth near 10%. These numbers show a company on a good upward path, which is important for any growth-focused investment.

Regarding valuation, NVO gets a 7, meaning it is fairly priced compared to its future. Its P/E ratio of 14.44 is not just under the industry average but also looks good next to the wider S&P 500, trading lower than both current and future market multiples. Also, measures like Enterprise Value to EBITDA and Price to Free Cash Flow show that NVO is less expensive than many others in the pharmaceutical industry. This fair pricing is important in the GARP model, as it helps prevent paying too much for growth and lowers potential loss.

Profitability is another strong area, with a rating of 9. NVO’s return on assets, return on equity, and return on invested capital are all in the top part of its industry, showing very efficient use of capital. Margins are also notable, with operating margins over 45% and profit margins close to 36%, doing better than most rivals. High profitability not only helps continued growth through reinvestment but also offers a safety buffer, a key point in sustainable growth investing.

Financial health, scored at 6, shows a few small issues, especially related to liquidity ratios like current and quick ratios, which are lower than preferred. However, these are somewhat balanced by good solvency measures, including a satisfactory Altman-Z score and an acceptable debt-to-free-cash-flow ratio. The company’s general stability and capacity to produce cash flow help ease liquidity concerns, highlighting that even with an affordable growth plan, investors need to weigh strong points against areas that need attention.

For those wanting to look into similar investment options, more companies that fit this affordable growth description can be found using this customized stock screen.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own research and consider their financial situation and risk tolerance before making investment decisions.