As compared to the company’s total sales of $46.6 billion, revenues are up at a CAGR of about 4%, which is in line with GDP growth. In 2021, Novartis generated $52.89 billion of revenues and generated $18.3 billion of EBITDA.

This is a very cautious valuation, given Novartis’ strong competitive moat and the company’s history of steady revenue growth and value accumulation.

Moreover, Novartis relative valuation implies a material discount to peers with regards to all multiples. For reference, Novartis trades at a 2023 forward PE of about x13 and a P/B of < x3. Novartis stock has performed well this year, being down only about -2.4% versus about -11.8% for the S&P.Īlthough Novartis stock has outperformed, I argue the market has not fully appreciated the company’s fundamentals and thus still undervalues NVS shares. The US is the company’s biggest market accounting for about 35% of sales, followed by Europe with about 30% and the rest of world, accounting for the remainder. Geographically, Novartis is based in Basel, Switzerland, but operates worldwide. Notably, Novartis owns and distributes multiple blockbuster medications including the multiple sclerosis drug Gilenya, chronic heart failure drug Entresto, ophthalmology drug Lucentis, and leukemia drug Tasigna. The Sandoz segment, with about 20% of total sales, is further divided into three franchises: Retail Generics, Anti-Infectives, and Biopharmaceuticals. Novartis' Innovative Medicines segment is about 80% of sales and focuses on everything related to patented prescription drugs. The company operates 2 key segments : Innovative Medicine and Sandoz. Novartis researches, develops, manufactures, and distributes a broad spectrum of drugs in categories such as respiratory and cardiovascular diseases, immunology, neuroscience, hepatology, and dermatology. Novartis is a global healthcare company with a research-driven focus on pharmaceuticals, both prescription-based and generic. Anchored on analyst consensus EPS, I calculate a fair implied value per share of $115.02. Valued at a one-year forward P/E of 3.5% dividend yield should protect the stock from further downside, while a residual earnings valuation framework clearly indicates upside.

Novartis ( NYSE: NVS) trades at a discount to fair value, in my opinion.

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