I think one of the favorites of the stock market is expected to be blown away. Here is the reason

Danish pharmaceutical giant Novo Nordisk (NYSE:NVO) has fallen sharply in 2024. Shares have risen more than 40% in the past year, making it one of the hottest tickets on the stock market. The company has set off a race for investors for its weight loss drug Govy again Ozempicwhich have shown that they may be genuine agreements.

But after such a stellar run, I think stocks may need to loosen their belts. That is why I am in no rush to accumulate any stocks at current prices.

An inflated estimate?

Shares now sport a price-to-earnings (P/E) ratio of about 46 times, which is decidedly greater than a P/E ratio of about 15 times for its peers. A price-to-sales ratio (P/S) of 15.7 times also dwarfs the scale. These multiples suggest that the market is already primed for massive spending growth to come. This makes me nervous after such a healthy meeting, because any disappointment or mistakes can cause a big drop.

So while recent performance has been mouth-watering, with earnings up 33.7% over the past year, continuing this pace could be a tall order. Analysts expect earnings growth to slow to 14% annually in the coming years. That's still a healthy figure, but perhaps not enough to justify the premium price tag.

Supply and control challenges

Another limitation to near-term growth is supply constraints for its popular GLP-1 drug. While this overwhelming demand is a good problem to have, it has forced management to launch into other global markets.

Fixing these production problems will take time and a healthy injection of capital. Meanwhile, competitors like Eli Lilly they are rushing to bring new amazing weight loss drugs to the table, which may take a bite without the first benefit of movement.

As obesity and diabetes treatment gains more users, it also attracts more attention from regulators. Across the pond, Medicare is preparing to begin price exchanges, which could hit profit margins in the mass market.

There are also ongoing studies that move and reveal the potential effects of GLP-1 drugs. Although the drug has been shown to be safe in clinical trials, any safety concerns can cause serious damage to the party.

Another concern is that some insiders have recently cashed out their chips. The company's books show an employee representative reduced £1.1m worth of stock in mid-August. While inside sales don't mean the sky is falling, it's worth chewing when it happens after such an exciting run.

One to watch

Despite these potential near-term setbacks, I think the company's long-term outlook remains as bright as ever. The global obesity epidemic is not going away anytime soon, and Novo Nordisk is well positioned as a leader in this growing sector. The company also has a full plate of new drug candidates in development that may drive future growth.

However, given the rich value and potential speed bumps ahead, I suspect the stock may struggle to maintain its recent Usain Bolt outlook in the coming months. So while Novo Nordisk may be holding its breath in the stock market, I think it's still a high-quality business that deserves a place on any savvy Fool's watch list.