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What’s Novartis’s Valuation in March 2018?


Mar. 13 2018, Published 4:07 p.m. ET

A look at Novartis

Novartis (NVS) is one of the leading pharmaceuticals companies. The company is involved in developing, manufacturing, and commercializing various pharmaceuticals and healthcare products globally. The US markets accounted for ~33.6% of total revenues for Novartis during 4Q17, while the remaining were contributed from outside the US markets.

The above chart compares revenues and earnings per share for Novartis since 1Q16.

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Revenues and EPS

Novartis reported earnings per share (or EPS) of $1.21 on revenues of ~$12.9 billion during 4Q17, which translates to 5% growth in revenues during 4Q17 as compared to revenues of $12.3 billion during 4Q16. The growth was driven by a 2% increase in operating revenues and a 3% favorable impact of foreign exchange during 4Q17.

Forward PE

PE multiples represent what one share can buy for an equity investor. On March 12, 2018, the company was trading at a forward PE multiple of ~15.1x. The industry currently trades at a forward PE multiple of ~13.0x. Other competitors such as Eli Lilly (LLY), Pfizer (PFE), and Merck (MRK) have forward PE multiples of 15.9x, 12.4x, and 13.1x, respectively.

Forward EV-to-EBITDA

On a capital-structure-neutral basis, Novartis currently trades at a forward EV-to-EBITDA multiple of ~13.2x, which is much higher than the industry’s average of ~10.6x as of March 12, 2018. Eli Lilly (LLY), Pfizer (PFE), and Merck (MRK) have forward EV-to-EBITDA multiples of 12.7x, 10.6x, and 10.7x, respectively.

The VanEck Vectors Pharmaceutical ETF (PPH) holds 4.8% of its total investments in Novartis (NVS), 4.0% in Eli Lilly (LLY), 4.9% in Pfizer (PFE), and 4.9% in Merck (MRK).


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