Senseonics Vs. Novo Nordisk: Which Diabetes Stock Is A Better Buy?
Senseonics Holdings, Inc. (SENS - Get Rating) and Novo Nordisk A/S (NVO - Get Rating) are two established players in the medical industry. SENS is a medical technology company focused on the design, development and commercialization of glucose monitoring systems. NVO designs and manufactures pharmaceutical products. Based in Denmark, NVO operates through two segments: Diabetes and Obesity care, and Biopharm.
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Diabetes is rising at an alarming rate in the West, accelerated by the remote lifestyles and work-from-home routines. As a result, pharmaceutical companies have been experimenting with innovative drugs to cure and manage the ailment. Many companies have reported promising results from their clinical trials, indicating that a diabetes treatment drug might soon be available in the market.
The size of the global diabetes drug market is projected to hit $78.30 billion by 2026, growing at a 6.1% CAGR.
While SENS has gained 312.5% over the past year, NVO has returned 25.5%. In terms of their past six months’ performance, SENS is a clear winner with 461.7% returns versus NVO’s 16.7% gains. But which of these two stocks is a better pick now? Let’s find out.
Latest Movements
On February 24, NVO and the University of Toronto announced a DKK 200 million ($32.80 million) investment to establish the Novo Nordisk Network for Healthy Populations. The network is expected to focus on new ways to support healthier urban populations by leveraging the university’s leading expertise in public health research and education programs to push forward the global fight against diabetes and other serious chronic diseases.
On February 1, SENS announced that Ascensia Diabetes Care had begun sales and marketing activities for the Eversense XL CGM system in key European markets, as part of their strategic partnership agreement announced in August 2020.
Recent Financial Results
SENS’ total revenue increased 7,805.6% from the prior-year quarter to $2.90 million for the first quarter, ended March 31, 2021. Its net loss came in at $241.51 million, which represents a 485.9% decline year-over-year. The company’s loss per share was $0.68, down 223.8% year-over-year.
For the first quarter, ended March 31, 2021, NVO’s total sales were DKK 33.80 billion ($5.54 billion), down 0.21% from prior-year quarter. The company’s net income increased 39% year-over-year to DKK 12.62 billion ($2.10 billion). Its EPS increased 7.92% year-over-year to DKK 5.45.
Past and Expected Financial Performance
SENS’ revenue has increased at a 220.3% CAGR over the past five years. Analysts expect the company’s revenue to increase 179.2% in its fiscal year 2021 and 138.7% in fiscal 2022. Its EPS is expected to grow 60% for the current quarter, ending September 30, and 3.9% in its fiscal year 2021. Furthermore, its EPS is expected to grow at a 32.1% rate per annum over the next five years.
In comparison, NVO’s revenue increased at a 2.9% CAGR over the past five years. Its revenue is expected to increase 10.8% for the current quarter, ending June 30, 2021 and 9.8% in 2021. The company’s EPS is expected to grow 9.7% for the quarter ending June 30, 2021 and 9.8% in its fiscal year 2021. NVO’s EPS is expected to increase at a 1.3% rate per annum over the next five years.
Profitability
NVO’s $20 billion trailing-12-month revenue is 2.58 times ANET’s $7.76 million. Also, NVO is more profitable, with a 33.78% net profit margin versus SENS’ negative value.
Also, NVO’s 24.83% and 41.90% respective ROA and EBIT margins compare well with SENS’ negative values.
Valuation
In terms of forward EV/S, SENS is currently trading at 52.41x, 84.1% higher than NVO’s 8.31x.
SENS’ non-GAAP forward P/E ratio is negative. NVO, on the other hand, is currently trading at 25.08 times its 2021 EPS estimate.
So, NVO is the more affordable stock.
POWR Ratings
NVO has an overall A rating, which equates to a Strong Buy in our proprietary POWR Ratings system. However, SENS has an overall F rating, which equates to Strong Sell. The POWR Ratings are calculated by considering 118 different factors, with the weighting of each optimized to improve overall performance.
SENS has a D grade for Quality. This is justified by its negative ROA. NVO has an A grade for Quality. Its 52.46% trailing-12-month ROA compares favorably with the negative industry average.
SENS has a F grade for Sentiment. This is justified because analysts expect the company’s EPS to remain negative until at least 2022. NVO has a B grade for Sentiment, which is in sync with its favorable analyst sentiment and revenue and earnings outlook.
Of the 57 stocks in the Medical-Diagnostics/Research industry, SENS is ranked #54. In comparison, NVO is ranked #4 out of 229 stocks in the Medical-Pharmaceuticals industry.
In addition to the POWR Ratings grades we’ve just highlighted, both SENS and NVO are graded for Momentum, Value, Stability and Growth. Click here to see the additional ratings for SENS. Also, get all NVO’s ratings here.
The Winner
Despite SENS’ impressive revenue growth in the most recent quarter, the company has yet to turn a profit. Also, the company’s non-GAAP forward P/E multiple is negative, implying declining earnings potential. Thus, NVO appears to be a better investment here based on its lower valuation and superior financials.
Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here and here to learn about other top-rated stocks in the Medical-Diagnostics/research industry. Click here to learn about the top-rated stocks in the Medical-Pharmaceuticals industry.
NVO shares were trading at $78.92 per share on Friday afternoon, up $0.10 (+0.13%). Year-to-date, NVO has gained 14.11%, versus a 12.84% rise in the benchmark S&P 500 index during the same period.
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