Down Near Its 5-Year Low, Is Novo Nordisk Stock Too Cheap to Pass Up?

Shares of Danish drugmaker Novo Nordisk (NYSE: NVO) have been in a full-blown tailspin over the past 12 months. The stock has lost more than half of its value as the company has been delivering some underwhelming results recently, and its guidance isn't looking too promising, either.

It's been a bit of a perfect storm that has resulted in Novo Nordisk stock now tumbling to levels it hasn't been at since early 2021. That's even before its weight loss drug, Wegovy, obtained approval from regulators, which was in the summer of that year.

To say investors have been bearish on Novo Nordisk would be an understatement. But the big question is, has the bearishness become excessive, and has the healthcare stock become so cheap that it's effectively become a no-brainer buy?

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Novo Nordisk may be down, but I wouldn't count it out

It's a tough road ahead for Novo Nordisk as the company has a new CEO, and it slashed its guidance for the year ahead. It projects that its revenue could be down by as much as 13% for the current year, even as it has launched a new Wegovy pill.

The company is facing pricing pressure, but management believes that by lowering prices, winning over customers, and gaining market share, it could set itself up for better growth in the future. Novo Nordisk has also reached a deal with telehealth company Hims & Hers Health recently to sell its GLP-1 products on Hims' platform, which could help grow sales even further. That announcement came after Novo's troubling guidance, and thus, may result in better growth numbers than feared.

The stock is a steal, even if you're concerned about its growth prospects

The market has a tendency to overprice stocks that are doing well and undervalue ones that are struggling. But that can be good news for long-term investors, because it allows you to lock in a low price for a company that is underperforming. Billionaire investor Warren Buffett has said in the past that he likes to invest in businesses that are in "temporary trouble" simply because it can be highly advantageous to do so, particularly when the market is undervaluing them.

In Novo Nordisk's case, I think the business is facing temporary headwinds, and that it's still a solid company to invest in for the long haul. The stock today trades just 10 times its earnings, which is a dirt cheap multiple for one of the top healthcare companies in the world. At this kind of valuation, you're getting an excellent margin of safety with the investment, and there could be significant upside in the future.

Novo Nordisk may be in the midst of a challenging year, but as long as you're willing to stay the course and remain invested for the long term, it can be an excellent buy right now.

David Jagielski, CPA has positions in Novo Nordisk. The Motley Fool has positions in and recommends Hims & Hers Health. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.