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A Look at Novartis’s Valuation on October 9

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Novartis’s recent performance

Novartis AG (NVS) reported EPS of $1.29 on revenue of $13.2 billion in the second quarter, reporting a 7% YoY (year-over-year) rise in revenue compared to $12.2 billion in the second quarter of 2017.

The above chart compares the valuation multiples of Novartis and its peers as of October 9.

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Forward PE

As of October 9, Novartis is trading at a forward PE multiple of ~15.5x, higher than the industry average of ~14.6x. Other competitors Merck & Co. (MRK), Eli Lilly and Company (LLY), and GlaxoSmithKline (GSK) are trading at forward PE multiples of 15.4x, 20.0x, and 13.3x, respectively.

Forward EV-to-EBITDA

On a capital-structure-neutral basis, Novartis is currently trading at a forward EV-to-EBITDA (enterprise value-to-EBITDA) multiple of ~13.6x, higher than the industry average of ~12.5x, as of October 9. Merck & Co., Eli Lilly, and GlaxoSmithKline are trading at forward EV-to-EBITDA multiples of 12.5x, 15.5x, and 9.8x, respectively, as of the same date.

Forward EV-to-revenue

Novartis is currently trading at a forward EV-to-revenue multiple of ~4.4x compared to the industry average of ~4.5x as of October 9. Merck & Co., Eli Lilly, and GlaxoSmithKline are trading at forward EV-to-revenue multiples of 4.7x, 5.2x, and 3.2x, respectively, as of the same date.

The VanEck Vectors Pharmaceutical ETF (PPH) holds 5.0% of its total investments in Novartis, 5.0% in GlaxoSmithKline, 5.0% in Merck & Co., and 4.8% in Eli Lilly.

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