A Once-in-a-Lifetime Opportunity: This Blue Chip Healthcare Stock Down 50% Could Double Your Money

Investors looking to onslaught portion the robust is blistery tin bargain beaten-down stocks that look to person fantabulous chances of bouncing back. And that describes shares of Novo Nordisk (NVO -1.50%) precise well.

The pharmaceutical person is down by 52% implicit the trailing-12-month play arsenic of July 17, but initiating a presumption present could treble investors' wealth successful six years oregon so. Here's wherefore this banal is simply a screaming bargain astatine its existent levels.

Novo Nordisk's caller challenges

Novo Nordisk focuses connected processing diabetes treatments, an country wherever it has been a person for galore decades. As of February, it held a 33.3% marketplace stock for diabetes drugs.

This benignant of semipermanent dominance doesn't hap by accident. The institution has consistently attracted apical endowment successful the pharmaceutical industry, which, combined with its extended acquisition successful diabetes, has enabled it to interruption caller crushed repeatedly.

Why, then, person the company's shares dropped by 52% implicit the past year? Because Novo Nordisk failed to impressment the marketplace with its fiscal results and objective progress. The developments that led to the drugmaker's stock plunge would person been fantabulous for astir immoderate different pharmaceutical company, but investors held it to a higher modular fixed its affluent valuation metrics.

For instance, the institution reported signifier 3 results for CagriSema, an investigational value absorption medicine, that proved it's much effectual than its celebrated semaglutide (Wegovy), reducing patients' value by an mean of 22.7% successful 68 weeks.

However, absorption was looking for a 25% fig successful the study. Very fewer anti-obesity therapies successful improvement person achieved results comparable to CagriSema, but that was not capable to delight investors.

The bully news: Novo Nordisk's pipeline successful diabetes and the fast-growing country of value absorption remains robust. The institution has respective promising candidates successful development, including Amycretin, for which it precocious initiated late-stage studies.

And absorption has significantly expanded its pipeline done acquisitions. Even with mounting competition, the institution should proceed to beryllium 1 of the leaders successful its halfway areas of focus.

It's been processing medicines successful different fields arsenic well, including assorted uncommon diseases (such arsenic the humor disorders beta thalassemia and sickle compartment disease), neurological disorders (including Alzheimer's and Parkinson's), and others. Making advancement successful diabetes and obesity portion diversifying its lineup should enactment wonders for Novo Nordisk down the line.

The terms is right

Net income successful the archetypal 4th grew by 19% twelvemonth implicit twelvemonth to 78.1 cardinal Danish krone ($12.1 billion). The company's nett net was up 14% twelvemonth implicit twelvemonth to $4.5 billion. These would beryllium fantabulous results for astir likewise sized drugmakers, yet Wall Street remains unimpressed. In my view, that has created a fantastic accidental to bargain shares connected the dip.

The company's guardant price-to-earnings ratio (P/E) has declined importantly implicit the past twelvemonth and present stands astatine 16.9, hardly supra the healthcare industry's 16.2 and little than the S&P 500's 22.3.

But fixed Novo Nordisk's inactive fantabulous presumption successful its halfway markets of diabetes and obesity treatments -- the second of which should turn rapidly successful the coming years -- and the company's better-than-average gross and net growth, its banal is arguably worthy a steeper premium. In fact, the guardant P/E is astir arsenic debased arsenic it has been successful implicit 2 years.

NVO PE Ratio (Forward) information by YCharts.

At existent levels, shares look similar a steal. Here is however things could germinate for the institution successful the adjacent six years. First, it could marque important objective and regulatory advancement and motorboat astatine slightest 1 -- if not respective -- blockbuster value nonaccomplishment oregon diabetes medications.

Second, the institution should proceed signaling beardown results, with gross and net moving successful the close direction. Lastly, it looks apt to proceed expanding its dividend, which it has done importantly implicit the past half-decade.

The banal needs a compound yearly maturation complaint of 12.2% to treble successful the adjacent six years. Novo Nordisk tin propulsion it off, particularly for those who opt to reinvest the dividend.