Does Novo Nordisk’s Recent FDA Approval Signal New Upside for the Stock in 2025?

Thinking about Novo Nordisk and wondering if now’s the time to jump in or step back? You’re not alone. The stock has been a talking point after posting a 7.8% climb over the last month, nudging some investors to consider its growth story once again. Despite that recent upswing, it's important to note that Novo Nordisk is still down 37.3% for the year to date and off a hefty 59.1% compared to one year ago. That mix of long-term gains—a solid 12.2% over three years and a really impressive 67.9% over five years—alongside recent volatility speaks volumes about changing risk perceptions and shifting confidence in the broader market.

With new treatments shaking up the pharma landscape and heightened interest from investors seeking value, there’s fresh curiosity about whether Novo Nordisk is trading below its true worth. On that front, the company’s valuation score stands at 5 out of 6, according to our quick-value check. In other words, Novo Nordisk comes out as undervalued in nearly every category that matters. That’s a strong signal, but let’s look more closely at how this score is calculated and why there could be an even more insightful way to judge Novo Nordisk’s true value by the end of this article.

Approach 1: Novo Nordisk Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model helps estimate a company's intrinsic value by projecting its future cash flows and discounting them back to today's value. This process takes into account the time value of money. This approach gives investors a way to gauge whether the current market price reflects the company's actual earning potential over time.

For Novo Nordisk, the latest twelve months of Free Cash Flow (FCF) came in at 68.36 Billion DKK. According to analyst estimates, FCF is set to rise significantly, with projections reaching as high as 148.36 Billion DKK by 2029. While analyst coverage extends about five years, beyond that point, cash flow growth is extrapolated based on longer-term market trends by Simply Wall St, suggesting continued expansion ahead.

Using this two-stage FCF to Equity model, the intrinsic value of Novo Nordisk's shares comes out to 181.6 DKK, based on projected future earnings discounted to the present. Compared to the current share price, the model marks the stock as roughly 69.8% undervalued, a substantial margin that signals the market may be overlooking the company’s underlying cash generation potential.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Novo Nordisk is undervalued by 69.8%. 

Approach 2: Novo Nordisk Price vs Earnings

For established, profitable companies like Novo Nordisk, the Price-to-Earnings (PE) ratio is often the primary valuation metric because it links the company’s market price directly to its ability to generate profits. This makes it useful for quickly comparing earnings power with other companies or the broader market.

However, what counts as a “normal” PE often depends on growth prospects and risk. Companies with higher expected earnings growth or lower risk tend to justify a higher PE, while those facing uncertainty or limited growth usually trade at lower PE multiples.

Novo Nordisk is currently trading at a PE ratio of 13.9x. This is notably lower than the pharmaceutical industry average of 18.9x and also below the peer group average of 24.8x. At a glance, this could signal undervaluation, but averages can miss the mark if they do not adjust for the company’s specific traits.

This is where Simply Wall St’s Fair Ratio comes in. Unlike static industry or peer averages, the Fair Ratio factors in Novo Nordisk’s expected earnings growth, profit margins, market capitalization, industry, and risk profile. This tailored approach aims to answer not just whether Novo Nordisk is cheap or expensive, but whether the current PE is justified by fundamentals.

In Novo Nordisk's case, the Fair Ratio stands at 33.1x. With the real-world PE multiple at 13.9x, there is a substantial gap suggesting that the stock trades significantly below what would be considered fair value based on its outlook and fundamentals.

Result: UNDERVALUED

NYSE:NVO PE Ratio as at Sep 2025

Upgrade Your Decision Making: Choose your Novo Nordisk Narrative

Earlier, we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply your story behind a company: your unique view that connects the numbers you believe in, like future revenue, profit margins, and a fair value estimate, to what is really happening at the company. This approach helps you link Novo Nordisk’s business outlook or product launches with your forecast for where the stock should trade, making investment decisions more meaningful and personal.

Narratives are easy to create and share on Simply Wall St's Community page, where millions of investors use them to map out how new information, such as earnings or big news, impacts their forecasts and fair value automatically. By comparing your Fair Value (what you think the stock is worth) with the current Price, Narratives empower you to decide when it might be smartest to buy or sell, based not just on stats but on your own conviction and market view.

For example, one Narrative for Novo Nordisk uses a fast growth forecast and higher profit margin, resulting in a fair value estimate of $120.72. Another, more cautious view, forecasts slower growth and a lower terminal multiple, estimating the stock's fair value at $69.18.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.