Great stock investing opportunities often come in two forms: undervalued stocks at an inflection point, and high-growth-at-a-reasonable-price shares. In my opinion, Novo Nordisk (NVO) stock offers the former, while Eli Lilly (LLY) stock offers the latter. NVO stock may achieve better one-year returns due to its undervaluation, but LLY stock is likely to deliver better two-year returns or more due to higher fundamental growth rates. Both pharmaceutical companies are at the forefront of weight loss drugs.
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Novo Nordisk Is Significantly Undervalued with High Growth Ahead
The primary reason I am bullish on NVO stock right now is that its share price is down over 40% from its all-time high. One of the greatest ways to achieve strong returns in the stock market is to buy great stock in companies benefiting from high-growth trends that are experiencing temporary weakness. Such temporary weakness often opens up a better valuation, which can then be capitalized on for one or two years, with the stock then sold at fair value.
Recently, Novo Nordisk has been benefitting from being one of two major suppliers of GLP-1 weight loss drugs. The other major competitor is Eli Lilly. However, in 2024, Novo Nordisk experienced issues with meeting demand due to manufacturing constraints. In addition, its next-generation obesity drug, CagriSema, underperformed the company’s target of 25% average weight loss in a late-stage trial.
However, recent developments show that Novo Nordisk’s manufacturing position will improve significantly in 2025 and 2026. The company acquired Catalent in December 2024, now owning its manufacturing facilities to address capacity constraints related to GLP-1 weight loss drugs.
Regarding the CagriSema trial, only 57% of participants reached the highest dose of the drug during the trial; this may have contributed to suboptimal outcomes. Future trials, such as the REDEFINE-2 study in 2025, could implement stricter dosing protocols to maximize efficacy and tolerability. Moreover, Novo Nordisk’s GLP-1 products will inevitably sustain robust demand as the only competitor of equal calibre is Eli Lilly.
NVO Stock Works Best as a Two-Year Holding
NVO should deliver the highest alpha while benefiting from strong GLP-1 demand and a valuation rebound from depressed sentiment, making it my top two-year holding when using a take profit target. My valuation model projects a trailing 12-month revenue of $56.27 billion by January 2027, assuming an 18% compound annual growth rate driven by GLP-1 momentum.
As Novo Nordisk integrates new production facilities and invests in manufacturing, I expect a moderate net income margin contraction to 32.5% in January 2027, resulting in $18.29 billion in net income.
I also assume a -1.5% annual decline in shares outstanding over the next two years, yielding 4.34 billion shares and an EPS of $4.22. Given the company’s growth likely mirrors historical averages, I use a midpoint of its trailing 12-month P/E of 28.5 and five-year average of 35.3, arriving at a terminal multiple of 31.9.
Consequently, I forecast a January 2027 stock price of $135. From today’s $86, that implies a 25% compound annual growth rate.
Is Novo Nordisk a Buy, Sell, or Hold?
On Wall Street, NVO stock has a consensus Moderate Buy rating based on four Buys, three Holds, and zero Sells. The average NVO price target of $147.80 indicates a 73.8% upside potential over the next 12 months. This strongly reaffirms my bullish stance on the stock.
Eli Lilly Has Stronger Operations, but a Rich Stock Valuation
Eli Lilly is quickly closing the gap in the GLP-1 market against Novo Nordisk, making me bullish on the stock, despite a rich valuation. It is more diversified than Novo Nordisk, which dominates about 55% of the global GLP-1 market as of 2024 with its flagship products Ozempic, Wegovy, and Rybelsus. Eli Lilly competes against Ozempic with Mounjaro, which combines GLP-1 and glucose-dependent insulinotropic polypeptide receptor agonism, as well as Zepbound, an obesity-focused drug competing with Wegovy.
By 2030, Eli Lilly will likely overtake Novo Nordisk in total GLP-1 sales. Potentially, Eli Lilly will have over $65 billion in annual GLP-1 sales compared to under $65 billion for Novo Nordisk. This is one reason to be bullish on Eli Lilly, but it’s also worth remembering that by 2030 the initial growth stage of the GLP-1 market will have significantly tapered. Moreover, the market has priced Eli Lilly at much higher valuation multiples compared to Novo Nordisk.
LLY stock has a trailing 12-month price-to-earnings ratio of 84, while NVO stock has a ratio of just 27.5. This is fundamental to why I prefer NVO to LLY stock at the moment, despite the latter having a forward revenue growth rate of 27% compared to a lower 22.5% for Novo Nordisk.
LLY Stock also Works Best as a Two-Year Holding
LLY stock is down 19.5% from its all-time high, driving my bullish outlook. This dip offers a potential opportunity, thanks to strong near-term growth prospects, even though I don’t consider the stock undervalued.
Eli Lilly’s trailing 12-month revenue stands at $40.86 billion, and it will likely reach at least $70 billion by January 2027. My independent estimate is $75 billion by then, due to strong momentum and a possible underestimation of GLP-1 drug market growth.
Once the company integrates its recent manufacturing investments, it can likely improve its net margin. I project a conservative 35% trailing 12-month net income margin in January 2027—just under its all-time high—leading to a net income forecast of $26.25 billion.
Over the past five years, Eli Lilly’s share count has fallen at a -2.7% compound annual rate. If this slows to -2.5% annually, there will be about 881.7 million shares outstanding, implying an EPS of $29.77 in January 2027.
The company’s growth rates have surged beyond historical averages, justifying its current price-to-earnings ratio of 84.5. Even though NVO stock has lower multiples, Eli Lilly’s near-term growth looks stronger.
Still, I expect a contraction in Eli Lilly’s P/E ratio to just above its 10-year median of 38 by January 2027, due to tapering growth rates. If so, the stock could reach $1,190, reflecting a compound annual growth rate of 25%.
Is Eli Lilly a Buy, Sell, or Hold?
On Wall Street, LLY stock has a consensus Strong Buy rating based on 15 Buy ratings, two Hold ratings, and zero Sell ratings. The average LLY price target is $1,050, indicating a potential 37.3% gain over 12 months and supporting my bullish sentiment on the stock.
Key Takeaway: Both Stocks Are Great Investments
The preference that readers have over NVO or LLY stock will largely come down to whether one prefers value or growth investments. Eli Lilly has better sentiment and likely a more extended high-alpha horizon of at least two years, but Novo Nordisk could deliver exceptional growth of over 70% in just 12 months, according to analyst estimates. While I already own NVO stock, I’m considering buying LLY at an equal-sized stake.
