NOVARTIS AG-SPONSORED ADR (NYSE:NVS) – A Potentially Undervalued Stock With Strong Fundamentals

NOVARTIS AG-SPONSORED ADR (NYSE:NVS) was identified by our stock screener as a potential value opportunity, offering a combination of solid profitability, financial health, and reasonable growth—all while trading at an attractive valuation. The pharmaceutical giant stands out as a candidate for investors seeking stable returns with a margin of safety.

Valuation

NVS appears undervalued compared to both industry peers and the broader market. Key highlights from the fundamental report include:

• P/E Ratio of 13.04 – Below the industry average (24.04) and significantly lower than the S&P 500’s 27.50.
• Forward P/E of 12.59 – Suggests continued reasonable pricing relative to future earnings.
• Enterprise Value/EBITDA and Price/Free Cash Flow – Both ratios indicate NVS is cheaper than 86% of its pharmaceutical peers.

Profitability

The company earns high marks for profitability, with strong margins and returns:

• Operating Margin of 32.76% – Better than 95% of industry competitors.
• Return on Equity (33.51%) and Return on Invested Capital (23.17%) – Both well above sector averages.
• Stable and Growing Earnings – EPS increased by 22.58% over the past year, with a 5-year average growth of 8.14%.

Financial Health

Despite some liquidity concerns (low current and quick ratios), NVS maintains a solid financial position:

• Low Debt Burden – Debt/Equity ratio of 0.61, manageable given strong cash flows.
• Altman-Z Score of 3.76 – Indicates low bankruptcy risk.
• Consistent Share Buybacks – Reducing shares outstanding over time, supporting per-share earnings growth.

Growth Outlook

While not a high-growth stock, NVS maintains steady expansion:

• Revenue Growth (10.85% YoY) – Outpacing its 5-year average.
• Expected Future Growth – EPS projected to grow at 6.52% annually, with accelerating revenue trends.

Our Decent Value Stocks screener lists more stocks with similar characteristics. For a deeper dive, review the full fundamental report for NVS.

Disclaimer

This is not investment advice. The observations here are based on data available at the time of writing. Always conduct your own research before making investment decisions.