jueves, 6 de agosto de 2015

TIME TO SELL: "Vende" Novartis...


Sell This Best-Of-Breed Pharma Major In The Short Term 


Summary 

  • NOVARTIS (NVS) is the best play among European pharma majors; the stock, however, is overvalued by 16% and is a SELL candidate. 

  • Entresto adoption will likely be a long and slow process, owing to the price differential with generic alternatives. 

  • Generics are expected to make a sizable dent to NOVARTIS's FY15 sales. 

  • Long term, NOVARTIS is projected to increase its EPS at 8%, backed by sales ramp-up of Entresto and oncology medications.

As shown in the table above, applying a P/E of 19 using NOVARTIS's (NVS) and the peer group historical median P/E ratio (corrected for growth rates and margins), the results of the valuation exercise conducted reveal that the stock is overvalued by 16%. I would avoid the stock at current levels and wait for a better entry point to open position for the long term. In the long term, with sales of its emerging drugs and the expanded oncology portfolio kicking in, the company should outperform its European pharmaceutical sector peers and deliver handsome returns. However, at current levels, the stock is a SELL candidate, in my opinion. 

 (Kindly use this article for information purposes only. Please consult your investment advisor before making any investment decision.)

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