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If you are wondering whether Novartis at around US$114.62 is still a solid entry or more of a hold, it helps to first pin down what a reasonable value range might look like.
The stock has seen a 0.9% pullback over the last 7 days, alongside returns of 4.6% over 30 days, 5.6% year to date and 24.2% over 1 year, with a 70.3% 3 year return and 80.0% over 5 years shaping how investors view its potential and risk today.
Recent news coverage has focused on Novartis as a large European pharmaceuticals group, with attention on how its portfolio and pipeline position it in the global healthcare sector. Commentators have also discussed how broader interest in established drugmakers may be influencing sentiment around the stock.
On our checks, Novartis scores 5 out of 6 on undervaluation tests, giving it a valuation score of 5/6. Next, we will walk through the key valuation methods behind that score before finishing with a way to look at value that goes beyond the usual ratios.
Find out why Novartis’s 24.2% return over the last year is lagging behind its peers.
A Discounted Cash Flow, or DCF, model estimates what a company might be worth today by projecting its future cash flows and then discounting those back to a present value.
For Novartis, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about US$18.2b. Analyst inputs are available out to 2030, with projected free cash flow of US$21.2b in that year. Beyond the first few years, Simply Wall St extrapolates the path of cash flows to complete the 10 year projection set, with values such as US$15.0b for 2026 and US$18.9b for 2028 in the forecast period.
On this basis, the DCF model arrives at an estimated intrinsic value of US$254.07 per share. Compared with the current share price of about US$114.62, this implies an intrinsic discount of 54.9%, which indicates that the shares are currently priced well below this modelled estimate of value.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Novartis is undervalued by 54.9%. Track this in your watchlist or portfolio, or discover 868 more undervalued stocks based on cash flows.
NOVN Discounted Cash Flow as at Jan 2026
For a profitable company like Novartis, the P/E ratio is a useful way to think about value because it connects what you pay for each share with the earnings that support that price.
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In simple terms, higher expected growth and lower perceived risk can justify a higher P/E, while slower expected growth or higher risk usually call for a lower, more cautious multiple. So the question is not whether a P/E is high or low in isolation, but whether it fits the company’s profile.
Novartis currently trades on a P/E of 19.82x. That sits below the Pharmaceuticals industry average of about 22.53x and well below the peer average of 85.47x. Simply Wall St also applies its own “Fair Ratio” framework, which estimates what a suitable P/E might be given factors such as earnings growth, profit margins, industry, market cap and risk profile. For Novartis, this Fair Ratio is 36.55x.
This tailored Fair Ratio can often be more informative than a simple comparison with industry or peer averages because it adjusts for company specific characteristics rather than treating all pharmaceutical stocks as alike. On this basis, Novartis’ current P/E of 19.82x sits below the Fair Ratio of 36.55x. This indicates that the shares are trading below that proprietary estimate of value.
Result: UNDERVALUED
SWX:NOVN P/E Ratio as at Jan 2026
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1417 companies where insiders are betting big on explosive growth.
Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives.
A Narrative is simply your story about a company, written in numbers, where you set your own view of fair value and your expectations for future revenue, earnings and margins instead of only relying on standard models.
On Simply Wall St, millions of investors use Narratives on the Community page to connect a company’s story to a financial forecast and then to a fair value that they can compare with the current share price to help decide whether they see it as a potential buy, a hold or a candidate to trim.
Because Narratives on the platform update when new information such as earnings releases or major news is added, your view of Novartis can stay aligned with the latest data without you rebuilding a model from scratch.
For example, one Novartis Narrative might assume a very conservative fair value while another assumes a much higher fair value based on different revenue and margin expectations. Both are visible side by side so you can see how differing stories lead to very different conclusions about the same stock.
Do you think there’s more to the story for Novartis? Head over to our Community to see what others are saying!
SWX:NOVN 1-Year Stock Price Chart
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.
Companies discussed in this article include NOVN.SW.
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