NVO: GLP-1 Giant Falls to 10x Earnings on Lilly Fears

At $37.45 per share, Novo Nordisk trades at a trailing P/E of 10.29 based on TTM earnings per share of $3.64. This is the lowest earnings multiple the stock has carried in over a decade and represents a dramatic re-rating from the 18–20x range it occupied through most of 2025.

The price-to-book ratio stands at 7.45x, while the Graham Number — which estimates intrinsic value based on earnings and book value — sits at DKK 77.11 per share, well above the current share price in DKK terms. By this traditional value metric, the stock is trading at a significant discount to conservative fair value.

However, the compressed multiple reflects genuine concerns. The stock trades at 28% below its 50-day moving average of $52.29 and 34% below its 200-day moving average of $57.16 — technical damage that typically takes months to repair even if the fundamental thesis stabilizes.

The market is effectively pricing Novo Nordisk as a mature pharma company in decline rather than the hyper-growth obesity drug leader it was 18 months ago. Whether that's a mispricing or a rational reassessment depends entirely on the competitive dynamics with Eli Lilly.

Despite the stock price carnage, Novo Nordisk's underlying business remains formidable. Full-year 2025 revenue reached DKK 308.4 billion across four quarters, with Q4 delivering DKK 78.4 billion — the strongest quarter of the year.

Quarterly EPS in DKK showed meaningful volatility. After posting DKK 6.54 in Q1, earnings dipped to DKK 5.96 in Q2 and fell sharply to DKK 4.50 in Q3 before recovering to DKK 6.06 in Q4. The Q3 weakness coincided with a 76.1% gross margin — significantly below the 81–83% range in other quarters — suggesting temporary cost pressures or product mix issues.

Full-year net income totaled DKK 102.4 billion, representing a net margin of 33.2%. Research and development spending increased to DKK 52 billion (17% of revenue) as the company invested in its pipeline, including the CagriSema program that has now become the focal point of investor anxiety.

The key concern in the earnings data is not the current performance — which remains strong — but the 2026 guidance. Management has projected a 5–13% decline in both sales and profits, primarily driven by U.S. price compression on GLP-1 drugs. This would be the first revenue decline in over a decade for a company that had been compounding at 25%+ annual growth.

Novo Nordisk generated DKK 119.1 billion in operating cash flow during 2025, a testament to the capital-light nature of pharmaceutical sales at scale. However, free cash flow tells a starkly different story.

Capital expenditure surged to DKK 90.1 billion in 2025, nearly doubling from DKK 51.3 billion in 2024 and representing a sixfold increase from the DKK 14.8 billion spent in 2022. This massive investment is funding new manufacturing facilities for GLP-1 drugs, a bet on sustained demand that now looks riskier in light of the CagriSema setback.

As a result, free cash flow plummeted to DKK 29.0 billion in 2025 from DKK 69.7 billion in 2024 and DKK 70.0 billion in 2023. The company ended the year with DKK 26.5 billion in cash, against a debt-to-equity ratio of 0.67.

The current ratio of 0.80 indicates the company is operating with negative working capital of DKK 43.2 billion — not unusual for a pharma company with predictable receivables, but it leaves limited cushion if revenue does decline as guided. Banco Santander recently cut its NVO position by 42.9%, a signal that some institutional investors are reducing exposure.