Novo Nordisk (NVO 0.84%), the company behind the popular weight-loss treatment Wegovy and diabetes medication Ozempic (also used by many for weight loss), has been a buy in recent years. Currently, it's trading at a 52-week high, and sales have been soaring. With a bright future ahead, does the stock have what it takes to be a millionaire-making investment?
The company has become a growth machine
Sales have taken off for Novo Nordisk, largely due to the strength of its obesity care treatments, which doubled in revenue last year. For five years, the company's sales have been rising sharply:
NVO Revenue (TTM) data by YCharts. TTM = trailing 12 months.
Last year, sales from Ozempic totaled just under 60 billion Danish krone ($8.9 billion) and accounted for just over one-third of total revenue. Wegovy, meanwhile, remains in its very early stages, its 2022 sales totaling 6.2 billion Danish krone ($930 million) and its percentage of total revenue just 3%.
The Food and Drug Administration approved Wegovy for chronic weight management in June 2021. It has also obtained approval in the U.K. and could be available near there soon, paving the way for more growth opportunities.
In the long run, there could be even more potential for Ozempic and Wegovy
Novo Nordisk's weight loss and diabetes treatments are in high demand now, and those trends could continue to rise. The number of people with diabetes is projected to increase significantly over the next two decades.
Image source: Novo Nordisk Q4 investor presentation.
There's also a significant need for weight-loss treatments, as obesity is a big problem often associated with diabetes and other illnesses. And it's a widespread problem affecting hundreds of millions of people across the globe.
Image source: Novo Nordisk Q4 investor presentation. BMI = body mass index.
Analysts see the stock doubling in the near future
The growth opportunities look to be mammoth for Novo Nordisk. Analysts have been boosting their price targets for the healthcare stock, and the consensus analyst price target is now at more than $346, suggesting an upside of more than 116% from where it trades today.
And analysts set price targets for where they think the stock will be within the next 12-18 months. In the long run, there will be even more upside as the need for managing obesity and diabetes will only increase and create more demand for Novo Nordisk's products.
Can Novo Nordisk make you a millionaire?
I'm confident that investing in Novo Nordisk could make you a millionaire; it's just a question of how much you would need to invest and how long you might need to hold on to that investment. Over the past 10 years, the stock's total returns (which includes dividends) totaled close to 490%, averaging a compounded annual growth rate of 19% during that stretch.
That might be an optimistic growth rate to sustain, so I'll be a bit more conservative and assume the stock can average a rate of 15% in the long run. At that rate, a $25,000 investment would grow to a value of $1 million after nearly 27 years. If, however, you could invest $50,000 into the stock, you would need to invest in it for close to 22 years before it would hit $1 million.
Obviously, a lot can change during such a long window of time, but there's definitely potential for the stock to reach $1 million. And even if you can't afford to invest so much in the stock today, it's still a great long-term buy that should net you a great return.
