Novo Nordisk practically doubled its free money circulate in 2022 from 2021. The Danish pharmaceutical firm introduced in the beginning of the month that its free money circulate final 12 months was 57.4 billion Danish kroner ($8.37 billion), in comparison with 29.3 billion Danish kroner in 2021.
This free money circulate supported “the strategic aspiration to ship engaging capital allocation to shareholders,” Novo Nordisk CFO Karsten Munk Knudsen mentioned through the firm’s earnings call.
“In 2022, we returned greater than 49 billion Danish kroner to shareholders by way of dividends and share buybacks,” Knudsen added. “Novo Nordisk has persistently returned its free money circulate to traders by means of each share buybacks and dividends.”
For 2023, the agency’s free money circulate is now anticipated to be between 60 billion and 68 billion Danish kroner, “reflecting the gross sales development and investments in capital expenditure,” based on the agency’s CFO.
Free money circulate is the sum of web money supplied by working actions and web money circulate utilized in investing actions. This measure is helpful when evaluating money obtainable for financing actions, together with shareholder distributions, after funding within the enterprise. Additionally it is a much better method to measure long-term profitability than GAAP earnings, based on funding supervisor FCF Advisors.
“At FCF Advisors we provide a singular method to gauge high quality funding,” mentioned Vince (Qijun) Chen, director of analysis and portfolio supervisor at FCF Advisors. “We measure profitability with free money circulate as a substitute of earnings, which is topic to supervisor discretion.”
FCF Advisors focuses on free money circulate funding methods, primarily by means of its Free Money Stream High quality Mannequin (FCFQM), a multi-factor mannequin that includes a mix of high quality measures knowledgeable by the agency’s analysis.
Novo Nordisk is at present the highest holding within the FCF International Quality ETF (TTAI), which goals to outperform the MSCI All Nation World Index excluding the U.S. by means of an lively funding course of. A quant mannequin is used to rank shares primarily based on proprietary measures of free money circulate. Roughly 140 of the highest-ranked shares are chosen after which weighted on a modified market-cap foundation.
The fund’s portfolio can also be rated with an ESG rating, excluding corporations with low ESG rankings. Corporations with an excessive rise in share depend and improve in leverage are additionally excluded.
“During the last a number of quarters, the market has been demanding profitability, and we’ve been measuring profitability by means of free money circulate,” mentioned Bob Shea, CIO of FCF Advisors. “Free money circulate has by no means been extra essential.”
TTAI carries an expense ratio of 0.59%.
For extra information, data, and evaluation, go to the Free Cash Flow Channel.
The views and opinions expressed herein are the views and opinions of the creator and don’t essentially mirror these of Nasdaq, Inc.