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Novartis (NVS) Stock Sinks As Market Gains: Here's Why

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The latest trading session saw Novartis (NVS - Free Report) ending at $98.87, denoting a -0.84% adjustment from its last day's close. This change lagged the S&P 500's daily gain of 0.27%. At the same time, the Dow added 0.43%, and the tech-heavy Nasdaq gained 0.19%.

The drugmaker's shares have seen an increase of 6.3% over the last month, not keeping up with the Medical sector's gain of 7.01% and the S&P 500's gain of 6.94%.

Market participants will be closely following the financial results of Novartis in its upcoming release. On that day, Novartis is projected to report earnings of $1.66 per share, which would represent year-over-year growth of 9.93%. Simultaneously, our latest consensus estimate expects the revenue to be $11.6 billion, showing an 8.56% drop compared to the year-ago quarter.

In terms of the entire fiscal year, the Zacks Consensus Estimates predict earnings of $6.54 per share and a revenue of $45.41 billion, indicating changes of +7.21% and -10.16%, respectively, from the former year.

Any recent changes to analyst estimates for Novartis should also be noted by investors. Such recent modifications usually signify the changing landscape of near-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Our research demonstrates that these adjustments in estimates directly associate with imminent stock price performance. To utilize this, we have created the Zacks Rank, a proprietary model that integrates these estimate changes and provides a functional rating system.

The Zacks Rank system, which varies between #1 (Strong Buy) and #5 (Strong Sell), carries an impressive track record of exceeding expectations, confirmed by external audits, with stocks at #1 delivering an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has moved 0.1% higher. At present, Novartis boasts a Zacks Rank of #3 (Hold).

From a valuation perspective, Novartis is currently exchanging hands at a Forward P/E ratio of 15.25. Its industry sports an average Forward P/E of 15.58, so one might conclude that Novartis is trading at a discount comparatively.

Investors should also note that NVS has a PEG ratio of 1.75 right now. The PEG ratio is akin to the commonly utilized P/E ratio, but this measure also incorporates the company's anticipated earnings growth rate. The Large Cap Pharmaceuticals industry currently had an average PEG ratio of 2.18 as of yesterday's close.

The Large Cap Pharmaceuticals industry is part of the Medical sector. This industry currently has a Zacks Industry Rank of 53, which puts it in the top 22% of all 250+ industries.

The Zacks Industry Rank is ordered from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Make sure to utilize Zacks.com to follow all of these stock-moving metrics, and more, in the coming trading sessions.


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