Let's talk about what happens when a market darling falls out of favor. Hard. Novo Nordisk A/S (NVO) has lost more than half its value from its peak. The stock is down 58% over the past year and has collapsed more than 40% in just the last month, tumbling from a high near $92 to around $38.

But here's the interesting part. Beneath the sheer panic of the selloff, something unusual has happened. Novo Nordisk is no longer priced like the hypergrowth, AI-era healthcare leader it was supposed to be. It's priced like a slow-growth, legacy pharma stock that's seen better days. The question is whether the market has gotten the story right, or if it's overcorrected in a big way.

A Valuation Gap You Can Drive a Truck Through

At just 10.6 times earnings, NVO stock now trades at a dramatic discount to pretty much everyone. Let's put that in perspective with a quick look at the competition.

This gap isn't just noticeable; it's striking. Its direct rival in the obesity drug space, Eli Lilly and Company (LLY), trades at more than four times Novo's earnings multiple. Even specialized biotech leaders like Vertex Pharmaceuticals Inc (VRTX)—companies with arguably narrower product portfolios—command valuations nearly three times higher.

Perhaps most tellingly, even slower-growth, more diversified pharma giants like Pfizer Inc (PFE) trade at nearly double Novo's valuation, according to market data. The message from the market is pretty clear: it's no longer pricing Novo Nordisk as the innovative creator and leader of the GLP-1 obesity drug category. It's pricing it as if that leadership has already peaked and the best days are firmly in the rearview mirror.

When Expectations Reset, Opportunities Can Emerge

The selloff isn't happening in a vacuum. It reflects real concerns—increased competition, potential pricing pressure, and expectations for slowing growth. That's all fair. But valuation compression of this magnitude often signals a fundamental shift in market expectations, not necessarily a collapse in a company's long-term relevance or cash-generating ability.

Here's the thing: Novo Nordisk still controls one of the most important drug platforms in modern healthcare. The global obesity drug market, which its medicines helped pioneer, is still expected to expand dramatically over the next decade. At a 9.4% earnings yield, the stock now seems to bake in far more pessimism than optimism. The market is essentially saying, "We don't believe in much future growth, so we'll only pay a low multiple for the earnings you have today."

From Growth Premium to Value Proposition

Novo Nordisk's collapse has effectively erased the growth premium it once enjoyed and replaced it with a valuation typically reserved for businesses in decline. That reset might be the real story here for investors.

Because when market leaders fall this far, the opportunity often isn't in what they've lost—everyone can see that in the stock chart. The opportunity is in how little investors are now willing to pay for what the company still controls. A P/E of 10.6 for a company with its market position and pipeline is a number that makes value investors sit up and take notice. It suggests that all the future potential has been priced out, and sometimes, that's exactly when a stock becomes interesting again.