NVS  Novartis Ag

Exchange

NYSE

Sector

Consumer Durables

Industry

Major Pharmaceuticals

Market Cap.

178.01B

Vuru Grade

69.64/100

Current Price

$74.98
+0.15 (+0.20%)

Growth Price

$56.21
Overvalued by 25.03%

Stability Price

$14.62
Overvalued by 80.50%

Company Metrics

  • P/E 26.78
  • P/S 3.6
  • P/B 2.37
  • EPS 2.8
  • Cash ROIC 11.30%
  • Cash Ratio 0.16
  • Dividend 2.75 / 3.69%
  • Avg. Vol. 3.38M
  • Shares 2.37B
  • Market Cap. 178.01B

Company Description

Novartis AG, through its subsidiaries, engages in the research, development, manufacture, and marketing of healthcare products worldwide. Its Pharmaceuticals division offers prescription medicines in various therapeutic areas, including cardiovascular and metabolism; oncology; neuroscience and ophthalmics; respiratory; integrated hospital care; and other additional products. The company's Vaccines... more


Download 10 Years of Financial Statements:
Income Statement   Balance Sheet   Cash Flow

News

Here's Why You Should Buy Novartis AG (ADR) (NYSE:NVS)
Library For Smart Investors - Mar 10, 2017
Although Swiss pharmaceutical company Novartis AG (ADR) (NYSE:NVS) missed analysts' expectations on its fourth quarter report, the company is in a strong position due to its diversified business model and product pipeline.
Positive Results For AbbVie Inc (NYSE:ABBV) Humira Biosimilar Reported By ... - Market Exclusive
Novartis AG (ADR) (NVS) is Upgraded by Societe Generale to ” Buy” - Highland Mirror
Ionis Pharmaceuticals Inc (IONS), Akcea Strike Favorable Deal with Novartis AG ...
Smarter Analyst - Jan 6, 2017
Ionis Pharmaceuticals Inc (NASDAQ:IONS) shares were initially up 6% this morning after the biotech firm and its wholly-owned subsidiary Akcea Therapeutics signed an exclusive cardiovascular disease treatment collaborative agreement with Novartis AG ...
Novartis in $1.6 bln deal for Ionis, Akcea drugs - MarketWatch
Novartis AG (ADR) (NYSE:NVS) Fined And Some Products To Be Temporarily ...
Market Exclusive - Mar 3, 2017
Novartis AG (ADR) (NYSE:NVS) has been fined approximately $174,000 in South Korea after the company was found guilty of bribing physicians in order to induce them to recommend the pharmaceutical firm's products.
Novartis AG (ADR) (NYSE:NVS) Breast Cancer Drug Approved by the FDA to Compete ...
Library For Smart Investors - Mar 15, 2017
Novartis AG (ADR) (NYSE:NVS) has said that Kisqali, a drug which when combined with letrozole is used for the treatment of breast cancer, has received the approval of the Food and Drug Administration.
Stock Movers- Novartis AG (ADR) (NYSE:NVS), Norfolk Southern Corp. (NYSE:NSC) - Wall Street Times (press release)
Novartis AG (ADR) (NYSE:NVS) To Pay $25 Million Over Bribery Allegations
Market Exclusive - Mar 25, 2016
Last year GlaxoSmithKline plc (ADR) (NYSE:GSK) posted a 17% drop in sales as a state-led campaign on drug prices affected returns.
Novartis Considering Sale Of Alcon Unit After Mixed Q4 Results And Outlook
ETF Daily News (blog) - Jan 25, 2017
In perhaps the biggest news stemming from the report, Novartis noted is considering strategic options for the consumer eye care Alcon Division.
Novartis AG (ADR): Why NVS Stock Is Ready to Rebound - Income Investors
Netflix, Inc. (NASDAQ:NFLX) & Novartis AG (ADR) (NYSE:NVS) Watch List
Daily News Journal - Mar 28, 2017
Shares of Novartis AG (ADR) (NYSE:NVS) inclined 0.98% to $75.10. The share price of the stock surged 6.43% for the year.
Here's What The Novartis AG (ADR) (NYSE:NVS) Deal Means For Conatus ...
Market Exclusive - Dec 20, 2016
Conatus Pharmaceuticals Inc (NASDAQ:CNAT) just announced that it has inked a deal with pharma giant Novartis AG (ADR) (NYSE:NVS); a deal that will see the latter team up with the microcap on the development of a drug called Emricasan. It's a NASH ...
Conatus Pharmaceuticals Inc (NASDAQ:CNAT) Updates On Collaboration Contract ... - Journal Transcript
Novartis AG (ADR) (NVS) Agrees To $50 Million Deal With Conatus ... - Insider Monkey (blog)
Analysts' Recommendations Stocks Buzz: AbbVie Inc (NYSE:ABBV) & Novartis AG ...
Daily News Journal - 6 hours ago
On Tuesday, Shares of AbbVie Inc (NYSE:ABBV) lost -0.18% to $65.98. The share price is trading in a range of $65.64 - 66.21. The stock exchanged hands with 5.07 million shares contrast to its average daily volume of 7.02 million shares.
Novartis AG (ADR) (NYSE:NVS) Says A Picture Is Worth A Thousand Words
Market Exclusive - Aug 30, 2016
Novartis feels that much is still not known about melanoma, especially the gene mutation that causes the disease. As such, the company has taken the initiative to use photographs to show the world something more about the disease and how it can be ...
Novartis AG (NYSE:NVS) Fights for Survival after Patent Expiration - TCC
Growth Rate Assumed by Market

We did a reverse valuation to calculate the growth rate the market is assuming for NVS to be considered fairly valued at its current market price. It's useful to compare this to the growth rate we're assuming for the Growth Price.

Future Free Cash Flow Growth Rate

This is the annual growth rate we've applied to calculate NVS's Free Cash Flow for the next 10 years. To calculate it, we looked at several time periods of the last 10 years. Feel free to adjust it, but we limit the initial growth rate to 20% and slow it down over the years. Otherwise, long-term sustainability issues come into play.

Discount Rate

The discount rate is the annual rate of return an investor requires to take the risk of investing in a single stock. To account for that risk, this should be above 8-10%, as this is the avg. annual rate of return for the S&P500 over the past 100 years.

$74.98 Current Price

$56.21 Growth Price (DCF)

Overvalued by 25.03%


Growth Rate Assumed by Market: 15.50%


Future Free Cash Flow Growth Rate: 1.1%


Discount Rate: 15.0%


Show Free Cash Flow numbers

$14.62 Stability Price (EPV)

Overvalued by 80.50%


Discount Rate: 15.0%

$69.49 Book Price

Overvalued by 7.32%


Shrinking Cash Return on Invested Capital over the past 5 years

NVS has less efficiently invested its financial resources in buildings, projects, and equipment, resulting in increasingly weaker returns. Look at its Annual Reports to determine whether this decrease has been caused by one-time events or a more general decrease in investment returns.

NVS has created $11.30 of cash for every $100 invested.
Figures in USD. Fiscal year ends in December
20112012201320142015
Free Cash Flow 11.92B 11.13B 9.60B 10.49B 8.39B
divided by
Invested Capital 89.39B 92.05B 90.66B 84.55B 104.00B
Cash ROIC 13.34% 12.09% 10.59% 12.41% 8.07%

Excellent Return on Equity over the past 5 years

Over the past 5 years, NVS has generated strong profits with money shareholders have invested. This is considered one of the best indicators of quality management. Beware of extremely high Return on Equity (> 50%) as this is often unsustainable.

NVS has generated $15.62 of Earnings for every $100 of Shareholders' Equity.
Figures in USD. Fiscal year ends in December
20112012201320142015
Net Income 9.25B 9.62B 9.29B 10.28B 17.79B
divided by
Stockholders' Equity 65.84B 69.09B 74.34B 70.77B 77.05B
Return on Equity 14.04% 13.92% 12.50% 14.53% 23.10%

Excellent Business Performance over the past 10 years

NVS has been able to maintain profitability in good times and bad. This could mean NVS has an extremely strong business or has the ability to scale down costs when needed. This should be a fairly resilient business, but double check for future sustainability by looking at its Risk Factors in the Annual Report.

NVS has created positive free cash flow for 9 or more of the past 10 years.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Free Cash Flow 6.70B 13.68B 7.35B 10.30B 12.39B 11.92B 11.13B 9.60B 10.49B 8.39B

Good Balance Sheet

NVS's Total Assets double Total Liabilities. Its financial position is adequate. Remember to check Shareholders' Equity to see if it's stable or growing. It's one of the best measures of whether a company is creating value for shareholders.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Cash 7.96B 8.96B 3.74B 17.45B 8.13B 4.96B 8.12B 9.22B 13.86B 3.85B
Current Assets 21.40B 27.43B 20.88B 33.69B 26.69B 24.08B 28.00B 30.54B 37.56B 22.85B
Total Assets 68.01B 75.45B 78.30B 95.51B 123.32B 117.50B 124.22B 126.25B 125.39B 131.56B
Current Liabilities 16.23B 16.64B 16.50B 19.47B 24.66B 23.15B 24.05B 26.37B 26.97B 23.71B
Total Liabilities 26.90B 26.23B 28.01B 38.12B 60.12B 51.65B 55.12B 51.91B 54.62B 54.51B
Stockholder' Equity 41.11B 49.22B 50.29B 57.39B 63.20B 65.84B 69.09B 74.34B 70.77B 77.05B
Current Ratio 1.32 1.65 1.27 1.73 1.08 1.04 1.16 1.16 1.39 0.96
TL-to-TA 0.40 0.35 0.36 0.40 0.49 0.44 0.44 0.41 0.44 0.41

Consistent Reinvestment of Profits over the past 10 years

NVS has consistently retained profits. This may put NVS in a strong position to invest for the future, by buying new machinery, investing in R&D or a number of other options. By effectively using these earnings, NVS can greatly improve their long-term economic picture.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Retained Earnings 40.26B 45.03B 49.83B 56.56B 62.36B 64.95B 68.18B 73.43B 69.87B 76.16B
Retained Earnings Growth - 11.85% 10.65% 13.52% 10.26% 4.15% 4.98% 7.70% -4.85% 9.00%

Competitive Advantage over the past 10 years

NVS likely has a competitive advantage which prevents other companies from entering or competing in their industry. This could be strong branding, the ability to keep costs low, or some other characteristic that is hard to replicate. Look at future prospects to determine its sustainability.

$21.12 of every $100 of Revenue have been pure profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Net Income 7.18B 11.95B 8.20B 8.45B 9.97B 9.25B 9.62B 9.29B 10.28B 17.79B
divided by
Revenue 36.03B 38.07B 42.58B 45.10B 51.56B 59.38B 57.56B 58.83B 53.63B 50.39B
Net Profit Margin 19.91% 31.38% 19.24% 18.74% 19.33% 15.57% 16.71% 15.79% 19.17% 35.31%

Strong Pricing Power over the past 10 years

NVS has maintained substantial gross margins, suggesting that they have been able to set prices without consideration of the cost of goods sold. This potentially leaves flexibility in inflationary environments to raise prices on consumers and maintain profitability.

$69.57 of every $100 worth of sales have been Gross Profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Gross Profit 25.73B 27.04B 31.15B 32.92B 37.07B 40.39B 38.81B 39.22B 36.29B 32.98B
divided by
Revenue 36.03B 38.07B 42.58B 45.10B 51.56B 59.38B 57.56B 58.83B 53.63B 50.39B
Gross Margin 71.42% 71.02% 73.14% 73.00% 71.90% 68.03% 67.42% 66.67% 67.66% 65.46%

Medium Capital Intensity over the past 10 years

NVS has used a reasonable amount of their financial resources to invest in facilities and equipment required to produce its goods and services. This isn't perfect, but it shouldn't be an area of concern unless this number is strongly trending upwards.

27.50% of Profits are being spent on Capital Expenditures, like Property, Plant, & Equipment, required to run the business.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Capital Expenditure 2.32B 3.13B 2.32B 1.89B 1.68B 2.39B 3.07B 3.57B 3.40B 3.51B
divided by
Net Income 7.18B 11.95B 8.20B 8.45B 9.97B 9.25B 9.62B 9.29B 10.28B 17.79B
Capital Expenditure Ratio 32.36% 26.23% 28.26% 22.32% 16.83% 25.82% 31.90% 38.43% 33.11% 19.70%

Very Strong Dividend History over the past 10 years

NVS has consistently distributed a dividend for at least the past 10 years. Such a long dividend history suggests NVS is very established in its market and that its dividend distribution is likely to continue for a significant period of time.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Dividend Paid 2.05B 2.60B 3.35B 3.99B 4.58B 5.57B 6.12B 6.20B 6.95B 6.65B
divided by
Shares Outstanding 2.36B 2.33B 2.28B 2.27B - 2.41B 2.45B 2.48B 2.43B 2.40B
Dividend Paid Per Share 0.87 1.12 1.46 1.76 - 2.31 2.50 2.50 2.86 2.77
Price at Year End 46.31 45.10 42.38 48.36 54.10 54.72 62.90 80.34 93.21 87.53
Dividend Yield 1.87% 2.47% 3.46% 3.64% - 4.22% 3.98% 3.11% 3.07% 3.16%

History of Stock Buybacks over the past 10 years

NVS has some history of delivering increased value for shareholders in the form of stock buybacks. These have helped improve financial metrics and increase each shareholders' relative ownership stake in the company, due to fewer shares outstanding and holding the same number of shares.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Shares Outstanding 2.36B 2.33B 2.28B 2.27B - 2.41B 2.45B 2.48B 2.43B 2.40B
Stock Bought Back - 1.35% 1.94% 0.72% - -100.00% -1.31% -1.37% 2.18% 0.96%
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Discussion
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7
Posted by AlwaysAContrarian  (on March 18, 2012)
There are plenty of pharamceuticals that are suffering from expiring patents. Hence, why the whole group of them are undervalued. There’s definitely going to be some corpses. Not sure if NVS will be one of them but they do have a number of promising anti-cancer drugs in the pipeline.
2
Posted by tmuscat27  (on March 23, 2012)
Medical companies always lose patents that is why I go year by year.I look at the eps and the probabilty of achieving the said eps and I discounted ot be on the safe side and by at the safe price
ANOTHER WAY I do it is by multiplying the 10 year average diluted eps bu the signiture eps and discount it.
2
Posted by Honeybadger  (on March 23, 2012)
I personally find eps a poor metric under most circumstances. Eps is easily (and legally) manipulated. Just playing devil's advocate.
1
Posted by timholland  (on March 26, 2012)
I agree (not playing devil's advocate). A much better indicator of company profitability is Free Cash Flow. Much less easily manipulated.
1
Posted by theguy  (on March 23, 2012)
How do you figure out the probability of a company achieving a given eps?
1
Posted by rsarda1  (on March 26, 2012)
What is going to kill the pharmaceuticals is the new ObamaCare. They are going to be even more heavily regulated than now, to the point that even the pricing of the drags will be determine by the Health Care secretary. This will result in less R&D, less new experimental medications, etc... all things that requires big initial spending. It will make much harder to recoup the initial investment. And they will focus on competing for with who makes the best aspiring, Tylenol, or similar.

who cares about aspirin - let the CVS make it - aspirin has been around so long that is hard to messit up.

Say goodbye to the free market competition in the pharmaceutical field.
1
Posted by tmuscat27  (on March 21, 2012)
That 20% was a guess. I know beause I take pills manufactured by nvs and the substitute was about 20%
tm
1
Posted by dougmccormick  (on March 21, 2012)
That assumes NVS's market share only drops 20%. If there's a product sells for 20% less, they could lose significantly more market share than just 20% if you see what I mean.
1
Posted by tmuscat27  (on March 21, 2012)
does anyone have info on azn, I was reading that they like to shed a lot of employees, but I think it is a better company. Any tgoughts?
1
Posted by tmuscat27  (on March 21, 2012)
patents are coming off however nvs has a generic subsidiary, I think the company would still sell the product, so the loss in profits would be around 20%
tm
1
Posted by dougmccormick  (on March 21, 2012)
NVS will definitely still sell the products but when there's a generic drug that's the equivalent selling for 30% less... surely they're going to take a bigger hit than 20%.

Do you have any examples of companies in similar situations who only saw profits drop 20%?
0
Posted by buffettdisciple  (on March 19, 2012)
Limited upside with high risk around expiring patents. I’m steering clear until there’s a more certain future for this stock.