IBD 50 Growth Stock: Diabetes Breakthrough Lifts Novo Nordisk

Novo Nordisk (NVO) is forming a flat bottom with a possible buy point at 144.88. The stock is poised to grow thanks to the recent FDA approval of a breakthrough oral drug to treat type 2 diabetes. NVO has joined the elite IBD 50 Growth Stock list. But a recent report on CBS' “60 Minutes” has the FDA investigating possible violations.


A 13-minute story about Novo Nordisk's weight-loss drug Wegovy aired on the Jan. 1 episode of CBS's “60 Minutes.” But a nonprofit group of doctors, the Physicians Council, said it was really an ad. The 17,000-strong association of doctors said the report lacked a “fair balance” and did not adequately address side effects of the drug or available alternative treatments.

The Denmark-based $326 billion pharmaceutical giant develops and markets treatments for diabetes, obesity, hormone replacement therapy and growth disorders. It is also collaborating with Lumen Bioscience to develop oral medicines for cardiometabolic diseases.

After the FDA approved Rybelsus, a revolutionary oral type 2 diabetes drug, it hit the fast track, taking the lead from Pfizer (PFE) and Eli Lilly (LLY). This compound stimulates hormones that regulate liver activity, while raising insulin levels in the body.

Novo also plans to increase production of Wegovy, which has been in short supply in the United States. Sales are reportedly up 300% in 2022 despite empty shelves.

NVO stock has an impressive Composite Rating of 94 and a Relative Strength Rating. Steady sales growth over the past eight quarters underscores the stock's fundamental strength. Earnings also rose during the period, but missed earnings estimates in one quarter, supporting an EPS rating of 83.

Strong Sales and Earnings Growth

Fourth-quarter sales were $6.9 million, up 18% year-over-year, while earnings rose 19% to 87 cents a share. FactSet analysts expect first-quarter 2023 sales to rise 11% year-over-year to $6.9 million and EPS to rise 16% to $1.08.

On Feb. 1, Novo shares rose on news that it would buy back $798 million worth of shares between February and May of this year.

The growth stock tops the Medical-Ethical Drugs subsector, according to IBD MarketSmith, and ranks 92nd out of IBD's 197 industry groups.

Growth stocks enter the NASH race

Last September, Novo acquired Ventus Therapeutics for $70 million, leading the lab's anti-inflammatory research for chronic kidney disease and other cardiometabolic diseases.

Earlier, it bought IFM Therapeutics for $1.5 billion, gaining access to its portfolio of drugs for metabolic, autoimmune and neurological diseases. IFM also studies treatments for fatty liver disease, for which there are currently no FDA-approved treatments.

Over the past seven quarters, an increasing number of funds have purchased NOVO stock. Growing fund ownership is a sign of strength according to the CAN SLIM trading methodology.

The exchange-traded fund also owns Novo Nordisk. VanEck Pharmaceutical ETF (PPH) and PGIM Jennison Focused Growth ETF (PJFG) hold shares.

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