Novartis AG (NVS): Among the Cheap Pharmaceutical Stocks to Buy According to Analysts

Novartis AG (NVS) has been identified by analysts as an attractive investment opportunity among cheap pharmaceutical stocks. The company's strong financial performance, robust pipeline, and strategic acquisitions have positioned it as a compelling choice for investors seeking exposure to the pharmaceutical sector. In this article, we will explore the key factors that make Novartis AG an attractive investment opportunity and discuss its recent financial performance and growth prospects.

Strong Financial Performance

Novartis AG has delivered robust financial results, with net sales growing +10% (cc, +8% USD) and core operating income increasing +18% (cc, +11% USD) in 2024. This strong performance is driven by key growth drivers like Entresto, Kesimpta, Kisqali, Pluvicto, and Scemblix. The company's operating income increased +39% (cc, +23% USD), and net income increased +62% (cc, +42% USD). Free cash flow from continuing operations was USD 13.2 billion (+9% USD), and EPS grew +70% (cc, +49% USD) to USD 4.13. Core EPS was USD 6.47, growing +25% (cc, +18% USD).



Innovation Pipeline

Novartis AG has a rich pipeline of new drugs, with ten positive Phase 3 readouts in the past year. These assets have significant sales potential and support the company's growth trajectory. The company's focus on four core therapeutic areas (cardiovascular-renal-metabolic, immunology, neuroscience, and oncology) and emerging platforms (gene & cell therapy, radioligand therapy, and xRNA) positions it well for future growth.

Dividend Growth

Novartis AG has consistently increased its dividend, with a 3.1% increase proposed for 2023. The company's dividend yield is 3.45%, and its payout ratio is 64.35%. This commitment to returning capital to shareholders, combined with the company's strong financial performance, makes Novartis AG an attractive investment opportunity for income-oriented investors.

Valuation

Novartis AG is currently trading at a trailing PE ratio of 18.05 and a forward PE ratio of 13.11, which is relatively cheap compared to its peers. Its EV/EBITDA ratio of 11.32 is also attractive, indicating that the company is undervalued relative to its earnings potential.

Strategic Acquisitions

Novartis AG has made strategic acquisitions, such as the acquisition of Anthos Therapeutics for up to $3.1 billion, to drive growth and expand its product portfolio. These acquisitions have helped the company maintain its competitive edge and capitalize on emerging opportunities in the pharmaceutical sector.

Geographic Focus

Novartis AG is focused on growing in its priority geographies, such as the US, China, Germany, and Japan, which have high growth potential. This strategic focus allows the company to allocate resources effectively and maximize its growth prospects.



Operational Excellence

Novartis AG continues to embed operational excellence, delivering improved financials and expanding its core operating income margin to ~40% by 2027. The company's commitment to operational efficiency and cost management has enabled it to maintain a strong financial position and invest in growth opportunities.

Analyst Consensus

According to six analysts, the average price target for Novartis AG is $123.67, which is 13.10% higher than the current price. The consensus rating is "Hold," indicating that analysts are generally optimistic about the company's prospects.

In conclusion, Novartis AG's strong financial performance, robust pipeline, strategic acquisitions, and commitment to dividend growth make it an attractive investment opportunity among cheap pharmaceutical stocks. The company's undervalued valuation and focus on emerging platforms and priority geographies position it well for future growth. As the company continues to execute on its strategic initiatives and deliver strong financial results, investors can expect Novartis AG to remain a compelling choice for exposure to the pharmaceutical sector.