Sometimes, even a market downturn isn’t enough to sink shares of companies firing on all cylinders. That’s been the case with Novo Nordisk (NVO -0.50%) and Visa (V -0.47%). These industry leaders have outperformed the market over the trailing-12-month period. Novo Nordisk and Visa have both been around for a while and generally produced excellent returns.
Yet, both companies have miles of growth left ahead, making them exceptional stocks to buy today. Let’s dig in.
1. Novo Nordisk
Novo Nordisk is a longtime leading pharmaceutical company that consistently generates growing revenue and earnings. In 2022, the drugmaker’s net sales increased by 26% year over year to about 177 billion Danish kroner ($25.5 billion), although in fairness, currency exchange rate fluctuations worked in the company’s favor.
In constant currency, Novo Nordisk’s top line jumped by 16% year over year, still an excellent performance for the pharma giant. On the bottom line, Novo Nordisk’s net profit jumped by 16% year over year to 55.5 billion DKK ($8 billion). Novo Nordisk continues to be a major player in the diabetes drug space. It had a 31.9% share of this market as of November 2022.
Some of the company’s key products in this area, such as Rybelsus, Ozempic, and Wegovy, are all contributing to sales growth. Wegovy is the newest of the bunch. It was first approved in the U.S. in mid-2021 to help patients with diabetes lose weight.
The initial demand for Wegovy substantially exceeded Novo Nordisk’s expectations. The company has had to step up its manufacturing capacity for the medicine. Wegovy’s sales in 2022 soared by 346% year over year to 6.2 billion DKK ($892.8 million). The comparison isn’t a perfect one since it only got approved in June 2021.
Still, Wegovy will be a key growth driver for the company. And Novo Nordisk is developing newer products that likely will also be highly successful. One of the most exciting candidates is icodec, an investigational once-weekly insulin product full of promise, for which Novo Nordisk could send an application to regulatory authorities this year.
Novo Nordisk has repeatedly proven its ability to innovate — a necessary condition for pharmaceutical companies to be successful over the long run. And with long-term tailwinds such as an aging population and the increase of people with diabetes, Novo Nordisk represents a solid buy-and-forget option for long-term investors.
2. Visa
Visa is a payment technology leader with perhaps one of the most recognizable brands in the world. That’s not surprising. Millions of people use the company’s services daily when purchasing items with a credit card that bears its logo. And for each of these transactions, Visa pockets a fee. The company’s revenue and earnings have continued to grow thanks to the increased popularity of digital forms of payment.
There aren’t that many companies that directly compete with Visa, and it is difficult to see newcomers seriously threaten its hold in this market. That’s because the value of Visa’s payment technology platform increases as more people use it — more merchants attract more customers, and vice versa — providing a powerful disincentive for both buyer and seller to leave Visa’s ecosystem.
In its fiscal 2023’s first quarter, ended Dec. 31, Visa saw revenue increase 12% year over year to $7.9 billion. The company’s net income came in at $4.2 billion, 6% higher than the year-ago period. Notice Visa’s attractive profit of 52.7% during the quarter. The company routinely generates profit margins near this range. Most companies of this size are lucky if they generate profit margins above 20%.
Visa’s growing revenue, earnings, and efficient operations are that much more attractive when looking at its long-term opportunity. Cash displacement is alive and well although various digital payments now seem ubiquitous. As the company’s CEO, Al Kelly, recently said, “There are still hundreds and hundreds of millions of people to bring into the financial mainstream. There are still trillions of dollars spent on cash and check.”
And that’s before looking at the $120 billion opportunity Kelly sees in the business-to-business space. Visa could continue to ride this trend for decades. Long-term investors only need to get in, even though the stock isn’t that far off from its all-time high, and stay put for the ride.
Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Visa. The Motley Fool recommends Novo Nordisk A/s. The Motley Fool has a disclosure policy.
