Novartis AG (NVS): Insiders Smell A Discount?

Novartis AG (NYSE:NVS) is now being followed by Guggenheim, as they initiated the stock at Neutral on October 09. Analysts at BofA/Merrill, shed their negative views on September 10 by lifting it fromUnderperform to Buy. The stock lost favor of HSBC Securities analysts who expressed their lack of confidence in it using a downgrade from Buy to Hold on May 29. Credit Suisse analysts came out with bullish views on May 25 when the call was made. They think the stock is now Neutral compared to to their prior call for Underperform.

Novartis AG (NVS) hit an intraday high Thursday at $89.44. The shares finished at $89.05, after trading as low as $87.89 earlier in the session. It dropped -1.89% in recent trade and currently has a stock-market value of $225.67B. Trading activity significantly improved as the volume at ready counter increased to 3,432,493 shares versus 2,788,270 in average daily trading volume over the past 20 days. So far this year, the volume has averaged about 1,956,172 shares. The stock is now 23.17% above against its bear-market low of $72.3 on June 28, 2018. It has retreated -5.77% since it’s 52-week high of $94.19 reached in January. Now the market price is up 6.21% on the year and up 6.06% YTD.

NVS’s 50 day simple moving average (SMA 50) price is $87.21 and its 200-day simple moving average (SMA 200) price is $81.83. The company’s stock currently has a total float of 2.52B shares. Its weekly volatility is hovering around 1.46% and felt 1.28% volatility in price over a month. On the upside, the share price will test short term resistance at around $89.7. On a downside, the stock is likely to find some support, which begins at $88.15. The failure to get near-term support could push it to $87.24.

Separately, it has been reported that multiple insider activity took place at Novartis AG (NVS). 10% Owner Novartis Bioventures Ltd acquired 36,111 shares for $516,036 in transaction occurred on 2014/09/22. After making this transaction, the 10% Owner owns a direct stake of 4,874,985 shares, worth $45,953,006, as per the last closing price.

Wall Street’s most bullish Novartis AG (NYSE:NVS) analysts are predicting the share price to blow past $109.34 per share during the next 12 months. The current median share price forecast by them is $92.85, suggesting that the stock could increase 4.27% in that time frame. The average price target of $92.8 calls for a nearly 4.21% increase in the stock price.

When looking at valuations, Novartis AG (NVS) has a cheap P/E of 15.68x as compared to industry average of 29.45x. Moreover, it trades for 16.19 times the next 12 months of expected earnings. Also, it is trading at rather expensive levels at just over 2.64x price/book and 4.29x price/sales. Compared to others, Novartis AG is in a different league with regards to profitability, having net margins of 25.4%. To put some perspective around this, the industry’s average net margin is 5.44%. NVS’s ROE is 17.9%, which is also considerably better than the industry’s ROE of 15.85%. It’s also very liquid in the near term, with a current ratio of 1.2. The stock has a debt/capital of 0.41.

Shares of Novartis AG (NVS) have gained 6.4% since the company’s last earnings report. Over the past 12 fiscal quarters, Novartis AG (NYSE:NVS) has topped consensus earnings estimates in 8 quarters (66%), missed earnings in 3 quarters (25%), whereas at 1 occasion EPS met analyst expectations. NVS last reported earnings on October 18, 2018 when it released Sep-18 results that exceeded expectations. The company raked in $1.32 per share, -26.67% change on the same period last year. That was better than consensus for $1.3. Revenue for the recent quarter stood at $12.78 billion, up 3% on last year and below the $12.92 billion predicted by analysts. For this quarter, Wall Street analysts forecast revenue in a range of $13.03 billion to $13.53 billion, which should be compared with $13.17 billion generated last year. EPS is seen in a range of $1.24 to $1.31, against the $1.25 reported a year ago.