Is Novartis AG (NVS) A Risky Investment?

Novartis AG (NYSE:NVS) trading with an addition of $1.21 to $83.00 on Thursday, an upside of 1.47 percent. An average of 2,216,546 shares of common stock have been traded in the last five days. There was a gain of $1.26 in the past week. The last 20 days have seen an average of 2,127,652 shares traded, while the 50-day average volume stands at 1,992,029.

NVS stock has decreased by -8.55% in the last month. The company shares reached their 1-month lowest point of $81.01 on 10/06/21. With the stock rallying to its 52-week high on 01/25/21, shares of the company touched a low of $77.04 and a high of $98.52 in 52 weeks. In spite of this, the price is down -15.76% from the 52-week high.

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Valuation Metrics

Novartis AG (NVS) has a trailing price-to-earnings (P/E) ratio of 20.66, which compares with the 23.00 for the broader industry and 32.28 for the sector. This means investors are optimistic about the stock’s future prospects. In the last five years, Novartis AG’s PE ratio has ranged between 32.46 and 12.68. The stock’s beta is 0.62. Other valuation ratios to consider include the trailing price-to-sales (P/S) ratio at 3.92, the price-to-book (PB) ratio at 3.40, and the price-to-cash flow ratio at 43.14.

Novartis AG pays a $2.08 dividend per share annually. It offers a dividend yield of 2.51%. The company has a payout ratio of 77.60%. The company’s most recent quarterly dividend payment took place on Mar. 15, and it was $3.3784 a share, representing a up of 9.94 from $3.0425 last year. Its dividend has been increased for the last 1 consecutive years with the latest increase dividend $0.3359 reported on Wednesday January 27 2021. Dividends have grown by 13.60% each year over the last three years.

Novartis AG will next go ex-dividend on 4-Mar. The next dividend payment Novartis AG will make is expected to be $2.804.

The quick ratio of Novartis AG for the three months ended June 29 was 0.60, and the current ratio was 0.80, indicating that the company is able to meet its debt obligations. Further, the company has a long term debt to equity ratio of 0.49 and a total debt to equity ratio of 0.66 for the quarter ending June 29. On the profitability front, the trailing 12-month gross margin is 70.70% against a 5-year average of 68.3%. Novartis AG’s EBITDA margin for the year ending June 29 is 35.52%, while its operating margin for the same period stands at 21.20%. Its gross profit as reported stood at $34.78 billion compared to revenue of $49.9 billion.

For investors, determining the potential profitability of the investment also depends on the performance of the company’s management. In the past 12 months, Novartis AG’s return on assets was 7.10%, compared to 7.1% over the last five years. In the past year, the return on investment has been 8.80%, and the 5-year average is 10.0%. Meanwhile, the return on equity (ROE) for the past 12 months has been 16.70% and the 5-year average holds at 13.5%. For the broader industry, ROE averaged -15.50 over the past year.

Earnings Surprise

For the three-month period that ended June 29, Novartis AG had $239.0 million in cash. The analyst consensus anticipated Novartis AG’s latest quarter earnings to come in at $1.53 per share, but it turned out to be $1.66, a 8.50% surprise. For the quarter, EBITDA amounted to $3.48 billion.

Technical Picture

From a technical analysis perspective, let’s take a brief look at Novartis AG (NVS) price momentum. RSI 9-day as of the close on 06 October was 45.57%, suggesting the stock is Neutral, with historical volatility in this time frame at 12.82%.

As of today, NVS’s price is $82.22 +1.55% or $1.26 from its 5-day moving average. NVS is currently trading -3.98% lower than its 20-day SMA and -6.22% lower than its 100-day SMA. However, the stock’s current price level is -9.63% below the SMA50 and -6.12% below the SMA200.

The stochastic %K and %D were 36.00% and 25.73%, respectively, and the average true range (ATR) was 0.99. With the 14-day stochastic at 68.63% and the average true range at 0.99, the RSI (14) stands at 38.77%. The stock has reached -0.08 on the 9-day MACD Oscillator while the 14-day reading was at -0.34.

Analyst Ratings

Deutsche Bank downgraded Novartis AG (NYSE: NVS) to a a Sell rating in its most recent analyst report. Previously, the stock was rated as a a Hold.The consensus rating for Novartis AG (NVS) among analysts is Overweight. According to current brokerage recommendations, 3 brokerage firms advise that investors sell NVS, while 7 suggest investors hold. There are 0 analysts who rate the stock as underweight. The stock is rated overweight by 2 analysts, while 12 others rate it as a “buy”.

What is NVS’s price target for the next 12 months?

Analysts predict a range of price targets between $75.17 and $123.49, with a median target of $100.18. Taking a look at these predictions, the average price target given by analysts for Novartis AG (NVS) stock is $101.00.


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