Novo Nordisk (NVO 0.62%) is the company behind Wegovy and Ozempic. Those drugs have been popular with consumers for their ability to help people lose weight and treat diabetes. And they have helped propel Novo Nordisk's valuation to $450 billion, making it one of the most valuable healthcare stocks today. But can the Danish company's valuation continue to rise, and can this be a stock that helps you retire a millionaire?
Novo Nordisk has a dominant market presence
Novo Nordisk is a leading company when it comes to diabetes and glucagon-like peptide-1 (GLP-1) drugs, which are effective in reducing a person's appetite. Wegovy and Ozempic are both examples of these drugs.
Novo Nordisk's market share in the GLP-1 drug market stands at over 54%, according to the company's recent earnings report. While it may not be able to maintain that level of market share as more competitors enter the space, its early dominance can give it an advantage by resonating with customers at these early growth stages and creating a strong brand presence.
The potential is there to get a whole lot bigger
Novo Nordisk's results have been impressive this year with sales of Wegovy totaling 21.7 billion Danish krone ($3 billion) and rising an incredible 481% during the first nine months of 2023. Ozempic is also growing at a fast rate of 53% and its sales are even higher, totaling 65.7 billion Danish krone ($9.2 billion). Overall, Novo Nordisk's total revenue over the first three quarters of 2023 is up 29% while profits have risen at an even higher rate of 47%.
What's encouraging is that there's also the potential for the company's key drugs to be used for more than just treating diabetes and weight loss. The company says that the Food and Drug Administration may soon expand the use for Wegovy, which is currently approved for weight loss, so patients can also use it to reduce their risk of cardiovascular disease. That approval could come within the next six months. If that happens, health insurance companies could be more eager to provide coverage as there would be more benefits to using the drug.
As these drugs are still in their early growth stages, it can be challenging to determine just how much revenue they may be able to generate for the business in the long run. But one thing that is clear: There is much more growth on the horizon.
Can Novo Nordisk be a 30+ bagger?
If you're looking to be a millionaire from investing in Novo Nordisk, you have to ask yourself how much you're comfortable investing in the business today. For most investors, putting in $50,000 is probably not a likely scenario. If, however, you could invest approximately $30,000 in the healthcare stock, then you would need to expect your investment to grow to be more than 33 times what its value is today for it to be worth $1 million.
To put that into perspective, Novo Nordisk would need to be worth nearly $15 trillion by the time you cash out, to get to $1 million by investing $30,000. And if you can't afford to invest that much, then you would need an even greater return, and for Novo Nordisk to grow to an even higher valuation.
Even if you have 30 years to go before retirement, you would still need to generate superior returns to what the S&P 500 has averaged over the long run (roughly 10% per year). Over a period of 30 years, your average annual return on Novo Nordisk would need to be approximately 12.4% for it to grow to be worth more than 33 times what it is today.
Beating the market may not be difficult in one year or over the course of five years. But to do it consistently for 30 years is no small feat. At the very least, Novo Nordisk would need to have some years where it wallops the index and achieves mammoth returns to make up for years where it has more modest gains.
Don't count on Novo Nordisk as a millionaire-maker
Novo Nordisk can make for a great long-term investment. The problem is that the odds of it becoming a 30x investment simply don't seem likely given its already hefty $450 billion valuation. The stock is doing exceptionally well this year and is up around 50%.
But given how lucrative the weight-loss market is shaping up to be, with estimates of it being worth more than $100 billion by 2030 according to Goldman Sachs, that will be sure to attract more competition, which could chip away at Novo Nordisk's impressive market share.
While Novo Nordisk is still an excellent growth stock, it's important for investors to temper their expectations and not hope for too much since its valuation is already fairly high.
