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Eli Lilly & Co. (LLY)

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March 24, 2025Undervalued
Compared to:

Pfizer Inc. (PFE) | Johnson & Johnson (JNJ) | Health Care Select Sector SPDR Fund (XLV)

Key takeaways
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Eli Lilly's strong financial performance, market-leading position in key therapeutic areas, and significant growth prospects in the incretin market suggest that the stock is undervalued despite its high current valuation multiples. The company's ability to maintain high profit margins and its promising pipeline, particularly Orforglipron, provide potential for future value creation that may not be fully reflected in the current stock price.

  • Eli Lilly's revenue growth is robust, driven by Mounjaro and Zepbound, with Q4 2024 revenue reaching $13.53 billion, a 45% increase year-over-year.
  • Profitability metrics, such as a gross profit margin of 82.24% and a net profit margin of 32.59% in Q4 2024, significantly exceed industry averages, indicating efficient operations.
  • Liquidity is a concern, with a current ratio of 1.15 in Q4 2024, well below the industry average of 6.91, suggesting potential short-term financial strain.
  • The debt-to-equity ratio of 237.06% in Q4 2024 is significantly higher than the industry average of 132.02%, indicating high financial leverage and potential solvency risks.
  • Management projects 2025 revenue between $58 billion and $61 billion, representing approximately 32% growth, driven by continued U.S. incretin class growth and Mounjaro launches in new international markets.
  • Eli Lilly is investing heavily in manufacturing capacity, with over $23 billion invested since 2020, to meet the increasing demand for its products.
  • The company faces significant pricing and reimbursement pressures, particularly from regulatory changes like the Inflation Reduction Act in the U.S.
  • Eli Lilly has generally outperformed the Health Care Select Sector SPDR Fund (XLV) and its peers, Pfizer Inc. (PFE) and Johnson & Johnson (JNJ), over the long term, but its higher volatility and recent underperformance in shorter time frames suggest a higher risk profile.
  • The company announced a $15 billion share repurchase program and a 15% increase in the quarterly dividend, signaling confidence in its financial performance.
  • Analysts are focused on the 2025 guidance assumptions, Zepbound payer dynamics and access, compounding litigation, and the positioning of Orforglipron.
Evaluation summary
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  1. Company Overview:

    • Eli Lilly & Co. (LLY) is a global pharmaceutical company involved in the discovery, development, manufacturing, and sale of pharmaceutical products. Key therapeutic areas include diabetes, oncology, immunology, and neuroscience.
    • The company's key products include Mounjaro, Trulicity, Verzenio, Jardiance, Taltz, and Zepbound. While specific revenue breakdowns are not provided, the earnings call highlights Mounjaro and Zepbound as primary revenue drivers.
    • The benchmark used for comparative analysis is the Health Care Select Sector SPDR Fund (XLV). The peers used for comparative analysis are Pfizer Inc. (PFE) and Johnson & Johnson (JNJ).

  2. Financial Performance:

    • Eli Lilly has demonstrated strong financial performance in recent quarters. Revenue has grown consistently, with Q4 2024 revenue reaching $13.53 billion, up from $8.77 billion in Q1 2024.
    • Net income has fluctuated, with a high of $4.41 billion in Q4 2024 and a low of $970.3 million in Q3 2024. This fluctuation is partly due to unusual expenses, which were particularly high in Q3 2024 at $2.88 billion.
    • Gross profit margin has remained consistently high, around 80%, with 82.24% in Q4 2024, indicating efficient cost management. Net profit margin was 32.59% in Q4 2024, significantly higher than 8.48% in Q3 2024.
    • Return on Assets (ROA) was 14.84%, Return on Equity (ROE) was 84.84%, and Return on Invested Capital (ROIC) was 29.49% in Q4 2024. These figures are significantly above the industry average ROA of -64.10%, ROE of -356.39%, and ROIC of -120.35%, indicating superior profitability and efficiency.

  3. Operational Efficiency:

    • Total assets have increased from $63.94 billion in Q1 2024 to $78.71 billion in Q4 2024, reflecting business expansion and acquisitions. Total liabilities have also increased from $51.05 billion to $64.44 billion during the same period.
    • Working capital has fluctuated, with a high of $6.74 billion in Q3 2024 and a low of $3.08 billion in Q2 2024. The working capital in Q4 2024 was $4.36 billion.
    • Net operating cash flow has varied, with a high of $3.71 billion in Q3 2024 and a low of $1.17 billion in Q1 2024. In Q4 2024, net operating cash flow was $2.47 billion. Total capital expenditure was $1.75 billion in Q4 2024.
    • Free cash flow to equity has also fluctuated, with a high of $2.36 billion in Q3 2024 and a low of $179.7 million in Q1 2024. In Q4 2024, free cash flow to equity was $977.8 million.
    • The company paid cash dividends of $1.17 billion each quarter. Share repurchases have also been significant, with a change in capital stock of -$2.05 billion in Q4 2024 and -$446.1 million in Q3 2024.
    • The current ratio was 1.15 in Q4 2024, lower than the industry average of 6.91, indicating potential liquidity concerns. The debt-to-equity ratio was 237.06% in Q4 2024, significantly higher than the industry average of 132.02%, indicating high leverage.

  4. Growth Opportunities:

    • Eli Lilly is focused on expanding its market presence with key products like Mounjaro and Zepbound, particularly in the incretin market. The company is also investing in its pipeline through internal development, acquisitions, and collaborations, as highlighted by the acquisition of Morphic Therapeutics.
    • The company is making significant investments in manufacturing capacity, with over $23 billion invested since 2020 in facilities in Indiana, Wisconsin, and Ireland.
    • The earnings call mentions multiple Orforglipron trials expected to read out in 2025, with potential submissions for obesity, indicating a focus on expanding its product portfolio.
    • Management is focused on delivering innovative medicines to patients and driving top-tier growth and margin expansion.

  5. Recent Developments and Market Sentiment:

    • The earnings call on February 6, 2025, highlighted strong Q4 2024 and full-year results, exceeding initial revenue guidance by $4 billion. Q4 revenue grew by 45%, driven by new products like Mounjaro and Zepbound.
    • Analysts are focused on the 2025 guidance assumptions, Zepbound payer dynamics and access, compounding litigation, and the positioning of Orforglipron.
    • The company announced a $15 billion share repurchase program and a 15% increase in the quarterly dividend, signaling confidence in its financial performance.
    • Management expressed confidence in the company's growth prospects, highlighting the early stages of the Mounjaro and Zepbound launch cycles and the progress in oncology, immunology, and neuroscience.

  6. Risks and Threats:

    • The company faces significant pricing and reimbursement pressures, particularly from regulatory changes like the Inflation Reduction Act in the U.S.
    • Legal and regulatory compliance issues, including ongoing litigation and investigations related to pricing, access, and product safety, pose substantial risks.
    • The company is dependent on relatively few products/product classes for significant revenue, making it vulnerable to competition and patent expirations.
    • Manufacturing difficulties, disruptions, or shortages impacting product supply could also pose a threat.

  7. Valuation Analysis:

    • The Enterprise Value to EBITDA ratio was 40.51 in Q4 2024. The Enterprise Value to Sales ratio was 16.91 in Q4 2024.
    • Compared to the industry average Enterprise Value to EBITDA of 49.89 and Enterprise Value to Sales of 9024.47, Eli Lilly appears to be undervalued based on sales but relatively fairly valued based on EBITDA.
    • Potential catalysts include positive clinical trial results, regulatory approvals for new products, and successful market launches.

  8. Price Performance:

    • The stock price has fluctuated between $765.28 on January 23, 2025, and $929.72 on March 3, 2025.
    • Eli Lilly has generally outperformed the Health Care Select Sector SPDR Fund (XLV) and its peers, Pfizer Inc. (PFE) and Johnson & Johnson (JNJ), over the long term. However, in shorter time frames, LLY has underperformed XLV.
    • The maximum drawdown for LLY was -24.28% on January 17, 2025, indicating a higher risk profile due to its potential for more significant declines from peak values.

  9. Future Outlook:

    • Management projects 2025 revenue between $58 billion and $61 billion, representing approximately 32% growth. EPS is projected to be between $22.50 and $24 on a non-GAAP basis.
    • The company expects continued U.S. incretin class growth and Mounjaro launches in new international markets.
    • Analysts are focused on the 2025 guidance assumptions, Zepbound payer dynamics and access, and the positioning of Orforglipron.

  10. Summary:

    • Eli Lilly demonstrates strong revenue and profitability growth, driven by successful new product launches and effective expense management. The company's profitability metrics are significantly above the industry average.
    • The company's liquidity position is a concern, as indicated by the low current and quick ratios, which are significantly below the industry average. High financial leverage, as reflected in the elevated debt-to-equity ratio, poses a solvency risk and could limit future financial flexibility.
    • While profitability metrics are strong, free cash flow has fluctuated, raising concerns about the quality of earnings.
    • Key strengths include its innovative product portfolio, strong R&D pipeline, and strategic acquisitions. Weaknesses include its high debt levels and liquidity concerns. Opportunities include market expansion with key products and new product launches. Threats include pricing pressures, regulatory risks, and competition.
    • Eli Lilly is a high-growth company with strong potential, but investors should carefully consider its liquidity position, high debt levels, and the risks associated with its aggressive expansion strategy.
Price history
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Fundamentals
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Insights
  • Eli Lilly demonstrates strong revenue and profitability growth, driven by successful new product launches and effective expense management.
  • The company's liquidity position is a concern, as indicated by the low current and quick ratios, which are significantly below the industry average.
  • High financial leverage, as reflected in the elevated debt-to-equity ratio, poses a solvency risk and could limit future financial flexibility.
  • While profitability metrics are strong, negative free cash flow raises concerns about the quality of earnings and the sustainability of dividend payments.
  • Strategic initiatives, such as manufacturing capacity expansions and acquisitions, are driving growth but also increasing debt levels and capital expenditure.
Analysis
  • Revenue - Revenue growth is strong and consistent, driven by new products like Mounjaro and Zepbound. - Sales/revenue and gross income show positive growth in most of the recent quarters. - The company's revenue growth is significantly higher than the industry average.
    • Profitability
      • Profitability metrics, such as gross profit margin, net profit margin, and EBITDA margin, are significantly above the industry average.
      • Operating income has more than doubled, driven by higher revenue from new products and improved gross margins.
      • The company's profitability is improving, as indicated by the upward trends in profitability ratios.
    • Liquidity
      • The current ratio is below 1, indicating potential liquidity concerns.
      • The quick ratio is also below 1, further suggesting liquidity issues.
      • The company's liquidity ratios are significantly lower than the industry average.
    • Solvency
      • The debt-to-equity ratio is high, indicating significant financial leverage.
      • Long-term debt has significantly increased, indicating reliance on debt financing for strategic initiatives.
      • The company's solvency ratios are above the industry average, indicating higher financial risk.
    • Operational Efficiency
      • Increasing receivables and inventories suggest potential inefficiencies in working capital management.
      • The company's asset turnover is lower than the industry average, indicating potential inefficiencies in asset utilization.
      • Capital expenditure efficiency needs to be evaluated by comparing past investments to revenue/profit growth.
    • Cash Flow Analysis - Net income growth has generally outpaced operating cash flow growth, suggesting potential quality of earnings concerns. - Persistent negative free cash flow is a red flag, indicating potential financial strain. - Dividend growth sustainability is questionable given negative FCF.
    • Risk Factors
      • The low current ratio and high debt-to-equity ratio are potential red flags, indicating liquidity and solvency risks.
      • The company faces significant pricing and reimbursement pressures, particularly from regulatory changes like the Inflation Reduction Act in the U.S., which could materially impact revenue and profitability.
      • Legal and regulatory compliance issues, including ongoing litigation and investigations related to pricing, access, and product safety, pose substantial risks and uncertainties for the company.
    • Future Outlook
      • Future income statement performance will depend on continued revenue growth, margin expansion, and expense control.
      • The company's financial flexibility may be constrained by its high debt levels.
      • Key metrics to monitor include the current ratio, debt-to-equity ratio, inventory turnover, operating cash flow, FCF, and debt service coverage.
Financial statements
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Public filings
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  • Lilly is a leading global pharmaceutical company focused on innovative medicines across therapeutic areas like diabetes, oncology, immunology, and neuroscience
  • The company faces significant pricing and reimbursement pressures, particularly from regulatory changes like the Inflation Reduction Act in the U.S., which could materially impact revenue and profitability
  • Lilly is actively investing in its pipeline and manufacturing capabilities through a combination of internal R&D and strategic business development transactions, but this is resulting in elevated acquired IPR&D and other charges
  • Legal and regulatory compliance issues, including ongoing litigation and investigations related to pricing, access, and product safety, pose substantial risks and uncertainties for the company
  • Lilly's financial performance is highly dependent on the commercial success of its key products, particularly its incretin medicines, and its ability to effectively manage its complex global supply chain and manufacturing operations
  • The company is leveraging its financial resources, including debt financing and share repurchases, to fund its strategic initiatives, but this is increasing its leverage and financial risks

Core Business and Operations:

  • Eli Lilly and Company is a global pharmaceutical company engaged in the discovery, development, manufacturing, marketing, and sales of pharmaceutical products worldwide
  • Key products include Mounjaro, Trulicity, Verzenio, Jardiance, Taltz, Zepbound, and others across therapeutic areas such as diabetes, oncology, immunology, and neuroscience
  • Operates through a global research and development organization, a supply chain organization, and regional commercial organizations
  • Relies on patents and intellectual property protection for a significant portion of revenue, cash flows, and earnings

Industry and Market Trends:

  • Facing continued pricing pressures and impact of actions by governmental and private payers affecting pricing, reimbursement, and patient access to pharmaceuticals
  • Regulatory and legislative changes, including the Inflation Reduction Act in the U.S., are expected to result in added pressure on pricing and reimbursement
  • Consolidation and integration of private payers and pharmacy benefit managers increasing their leverage in negotiating with manufacturers
  • Regulatory compliance issues and evolving manufacturing standards can lead to regulatory actions, product recalls, and supply disruptions

Recent Events:

  • Acquired POINT Biopharma Global Inc. to expand radiopharmaceutical capabilities
  • Acquired a manufacturing facility in Wisconsin to expand parenteral product manufacturing
  • Announced agreement to acquire Morphic Holding, Inc. for $3.2 billion
  • Sold rights for the olanzapine portfolio (including Zyprexa) and Baqsimi

Risk Factors:

  • Significant costs and uncertainties in the pharmaceutical R&D process, including regulatory approvals
  • Intense competition affecting products, pipeline, and industry
  • Dependence on relatively few products/product classes for significant revenue
  • Expiration of intellectual property protection and competition from generics/biosimilars
  • Manufacturing difficulties, disruptions, or shortages impacting product supply
  • Pricing pressures and actions by governmental/private payers
  • Litigation, investigations, and regulatory compliance issues
  • Fluctuations in foreign currency exchange rates

Legal Matters:

  • Defending against patent litigation related to Emgality
  • Involved in various lawsuits and investigations related to 340B program, insulin pricing, and other pricing/access matters
  • Facing litigation related to alleged exposure at a former manufacturing facility in Brazil

Management's Discussion and Analysis:

  • Revenue growth driven by increased volume and higher realized prices for key products like Mounjaro, Zepbound, and Verzenio
  • Gross margins improved due to favorable product mix and pricing
  • Increased R&D and marketing/selling expenses to support pipeline and launches
  • Significant acquired IPR&D charges related to business development transactions
  • Asset impairment, restructuring, and litigation charges impacting profitability
  • Effective tax rates impacted by non-deductible IPR&D charges
  • Investing in manufacturing capacity expansions to meet demand, particularly for incretin medicines
  • Accessing debt markets and share repurchases to fund operations and business development
Earnings calls
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Earnings Report 2024Q4 (2025-02-06)

Key takeaways
  1. Incretin Market Dominance: Lilly is well-positioned to capitalize on the rapidly growing incretin market with Mounjaro and Zepbound, but faces challenges in managing supply and demand.
  2. Pipeline Diversification: The company's strategic focus on diversifying its pipeline through internal development, acquisitions, and collaborations is crucial for long-term growth.
  3. Margin Expansion vs. R&D Investment: Balancing margin expansion with continued investment in R&D is a key strategic consideration for Lilly's future success.
  4. Orforglipron's Potential: Orforglipron represents a significant opportunity as an oral GLP-1, but its positioning and market uptake will depend on its efficacy, tolerability, and pricing relative to injectable GLP-1s.
  5. Obesity Market Uncertainty: Despite management's bullish outlook, there are valid concerns about the long-term size and accessibility of the obesity market, warranting careful monitoring of prescription trends and payer dynamics.
  6. Healthcare System Readiness: Addressing healthcare system readiness and capacity for diagnosing and treating diseases like Alzheimer's is critical for the successful launch and adoption of new therapies.
  7. Strategic Partnerships: Leveraging strategic partnerships, such as the collaboration with Rowe, can enhance patient access to authentic medicines and support the company's growth objectives.
Focus of management’s prepared remarks
  • Financial Performance and Growth: 2024 was a productive year with significant revenue growth, exceeding initial guidance. Q4 revenue grew by 45%, driven by recently launched products.
  • Pipeline Advancement: Positive Phase III results were announced for several key assets, including imlunestrant and tirzepatide. Phase III programs were initiated for lepodisiran, remternetug, and olomorasib.
  • Strategic Acquisitions and Collaborations: The company acquired Morphic Therapeutics and collaborated with OpenAI to enhance its pipeline and research capabilities.
  • Manufacturing Expansion: Significant investments were made to expand manufacturing facilities in Indiana, Wisconsin, and Ireland, totaling over $23 billion since 2020.
  • New Product Approvals and Indications: Regulatory approvals were received for Kisunla, Ebglyss, and a new indication for Zepbound in OSA, strengthening the portfolio.
  • Shareholder Returns: The company returned $3 billion to shareholders through dividends and share repurchases and announced a $15 billion share repurchase program and a 15% increase in the quarterly dividend.
  • 2025 Financial Guidance: Revenue is expected to be between $58 billion and $61 billion, with continued U.S. incretin class growth and Mounjaro launches in new markets.
  • R&D Investment: Plans to accelerate investment in early and late-stage R&D activities, including new Phase III programs.
  • Orforglipron Development: Multiple Orforglipron trials are expected to read out in 2025, with potential submissions for obesity.
  • Retatrutide Data: Initial data from the triple-acting incretin Retatrutide is expected late in 2025.
Focus of the analyst Q&A
  • 2025 Guidance Assumptions:
    • Whether the 2025 guidance requires an acceleration in prescription uptake trends or if it can be achieved with the same trajectory as in 2024.
  • Zepbound Payer Dynamics and Access:
    • Expectations for Zepbound payer dynamics and access in 2025, particularly the impact of the OSA label and the potential impact of a heart failure indication.
  • Compounding Litigation:
    • Next steps and focus areas regarding the compounding litigation.
  • Orforglipron Positioning:
    • Potential positioning of Orforglipron, particularly in the context of single injectable GLP-1 efficacy and the diabetes population.
  • Orforglipron Clinical Program:
    • Rationale for launching a wide range of Orforglipron studies, including hypertension, without initial readouts, and the balance between risk-taking and confidence in the asset.
  • Tirzepatide Commercial Potential:
    • Potential for tirzepatide in broader settings like diabetes prevention and the impact of a successful SURPASS-CVOT trial on reimbursement and access.
  • Operating Margin Sustainability:
    • Sustainability of operating margin expansions and the balance between margins and reinvestment in the pipeline.
  • Alzheimer's Launch Lessons:
    • Lessons learned from slower launches in the Alzheimer's space and early experiences with the Kisunla launch.
  • Orforglipron Outcomes Trial:
    • Rationale for not initiating an outcomes trial for Orforglipron.
  • Obesity Market Size:
    • Concerns about the size of the addressable and accessible obesity market, considering factors like slowing prescription trends and manufacturing capacity.
  • Sleep Apnea Treatment:
    • Discussions with prescribers and payers regarding the sleep apnea indication for Zepbound, and the approach to reaching sleep specialists and primary care physicians.
  • VOLENRELAXIN Program:
    • Reasons for canceling the heart failure and CKD programs for VOLENRELAXIN and the future potential of the long-acting relaxin mechanism.
  • GLP-1 Pricing Stability:
    • Implications of expecting relatively stable GLP-1 pricing in 2025, considering discounts and adherence.
  • Lilly Direct and Rowe Partnership:
    • Evolution of the relationship with Rowe and the opportunity associated with Zepbound vials.
  • Orforglipron Launch Timing:
    • Approach for the timing of the Orforglipron launch in terms of diabetes versus obesity, U.S. versus international, and the implementation of patient assistance programs.
  • Orforglipron Titration Schedule:
    • Impact of the Phase III titration schedule on weight loss, A1c, and safety results compared to Phase II.
  • Retatrutide Osteoarthritis Study:
    • Whether the Phase III readout in obesity and overweight patients with osteoarthritis of the knee is a reasonable comp for the obesity studies in 2026.
  • Bimagrumab Data:
    • Potential for bimagrumab data this year and the expected benefits of a muscle-preserving drug in combination with tirzepatide.
  • PBM Coverage:
    • Clarification on additional PBM coverage coming in March and the potential impact on script trends.
Summary

  1. Financial Performance

    Lilly reported strong Q4 2024 and full-year results, exceeding initial revenue guidance by $4 billion. Q4 revenue grew by 45%, driven by new products like Mounjaro and Zepbound. Non-incretin portfolio revenue increased by 20%, excluding one-time business development payments. EPS for Q4 was $5.32, including acquired IPR&D charges.

  2. Revenue Drivers

    Mounjaro and Zepbound were the primary revenue drivers, with significant contributions from oncology, immunology, and neuroscience. U.S. revenue increased by 40%, driven by volume growth, particularly from Zepbound and Mounjaro, partially offset by Trulicity declines. International growth was strong, especially in Europe (82% growth in constant currency) and Japan (27% growth in constant currency), driven by Mounjaro and other key products.

  3. Profit Margins and Cost Management

    Gross margin improved to 83.2% in Q4, primarily due to favorable product mix. R&D expenses increased by 18% due to investments in the pipeline. Marketing, selling, and administrative expenses increased by 26%, driven by promotional activities for new launches. Operating income more than doubled, driven by higher revenue from new products. The company anticipates continued margin expansion in 2025.

  4. Guidance and Outlook

    Lilly projects 2025 revenue between $58 billion and $61 billion, representing approximately 32% growth. The company expects continued U.S. incretin class growth and Mounjaro launches in new international markets. Trulicity volume is expected to decline. Net prices are forecasted to decline by mid- to high single digits. EPS is projected to be between $22.50 and $24 on a non-GAAP basis.

  5. Strategic Initiatives

    Lilly is focused on expanding manufacturing capacity, with the Concord facility expected to begin shipping medicines in 2025. The company is augmenting its internal pipeline through acquisitions and collaborations, including the acquisition of Morphic Therapeutics and a collaboration with OpenAI. A $15 billion share repurchase program and a 15% increase in the quarterly dividend were announced.

  6. Management Commentary

    Management expressed confidence in the company's growth prospects, highlighting the early stages of the Mounjaro and Zepbound launch cycles and the progress in oncology, immunology, and neuroscience. They emphasized the importance of reinvesting in R&D to drive sustainable growth. The overall tone was optimistic, with a focus on delivering innovative medicines to patients and driving top-tier growth and margin expansion.

  7. Industry and Market Conditions

    The incretin market is experiencing rapid growth, and Lilly is gaining market share. Management acknowledged the turbulence in predicting demand but remains bullish on the long-term potential of the obesity market. They highlighted the importance of addressing healthcare system readiness and capacity for diagnosing and treating diseases like Alzheimer's.

Comparative analysis
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Benchmarks (as of 2025-03-21)
Health Care Select Sector SPDR Fund (XLV)

  • Performance Comparison:

    • Eli Lilly & Co. (LLY) has generally outperformed the Health Care Select Sector SPDR Fund (XLV) over the 1-year, 2-year, and 3-year periods. For instance, the 3-year annualized return for LLY is 44.1%, significantly higher than XLV's 4.16%. However, in shorter time frames, such as the 1-month and 6-month periods, LLY has underperformed XLV. The YTD and 3-month performance show slight outperformance by LLY.

  • Risk and Return Analysis:

    • Eli Lilly & Co. (LLY) has provided higher annualized returns compared to the Health Care Select Sector SPDR Fund (XLV) over the 1-year, 2-year, and 3-year periods.
    • Eli Lilly & Co. (LLY) has generally exhibited higher annualized volatility compared to the Health Care Select Sector SPDR Fund (XLV). For example, in Q3 2024, LLY's volatility peaked at 50.41%, while XLV's peaked at 15.72%.
    • Eli Lilly & Co. (LLY) experienced a maximum drawdown of -24.28% on 01/17/2025, which is larger than the Health Care Select Sector SPDR Fund (XLV) maximum drawdown of -16.06% on 06/17/2022. This indicates that LLY has a higher risk profile due to its potential for more significant declines from peak values.

  • Risk-Adjusted Performance:

    • Eli Lilly & Co. (LLY) generally exhibits higher Sharpe Ratios compared to the Health Care Select Sector SPDR Fund (XLV), suggesting that LLY has offered better risk-adjusted returns over the analyzed period.
    • The beta values for both Eli Lilly & Co. (LLY) and the Health Care Select Sector SPDR Fund (XLV) have generally remained below 1, indicating that both are less volatile than the overall market. LLY's beta has ranged from 0.3 to 0.97, while XLV's beta has remained more stable around 0.6.

  • Overall Assessment:

    • Eli Lilly & Co. (LLY) has demonstrated strong performance with higher annualized returns and Sharpe Ratios compared to the Health Care Select Sector SPDR Fund (XLV). However, LLY also exhibits higher volatility and a larger maximum drawdown, indicating a higher risk profile. The increasing trend in LLY's beta during certain periods suggests a potentially increasing sensitivity to market movements. Overall, LLY may be suitable for investors seeking higher returns and willing to tolerate higher risk, while XLV may be more appropriate for risk-averse investors seeking stability.
Peers Price History(as of 2025-03-21)
Pfizer Inc. (PFE)Johnson & Johnson (JNJ)

  • Performance Comparison:

    • Eli Lilly & Co. (LLY) has significantly outperformed Pfizer Inc. (PFE) and Johnson & Johnson (JNJ) over the 2-year and 3-year periods, with returns of 152.9% and 199.24%, respectively, compared to PFE's -27.3% and -42.26% and JNJ's 14.03% and 2.02%. However, in the shorter term (Year-to-Date and 6 Months), LLY's performance has been mixed, underperforming JNJ YTD and both PFE and JNJ over the last 6 months. Over the 1-year period, LLY has outperformed PFE but performed similarly to JNJ.

  • Risk and Return Analysis:

    • Eli Lilly & Co. (LLY) has provided higher annualized returns over the 2-year and 3-year periods compared to Pfizer Inc. (PFE) and Johnson & Johnson (JNJ). For example, the 3-year annualized return for LLY is 44.1%, while PFE is -16.73% and JNJ is 0.67%.
    • Eli Lilly & Co. (LLY) has generally exhibited higher annualized volatility compared to Johnson & Johnson (JNJ) but has been comparable to Pfizer Inc. (PFE). High volatility was observed for LLY in Q3 2023 and Q3 2024.
    • Eli Lilly & Co. (LLY) experienced a maximum drawdown of -24.28% on 01/17/2025, which is less severe than Pfizer Inc. (PFE)'s -54.82% on 04/25/2024 but more than Johnson & Johnson (JNJ)'s -18.41% on 10/27/2023. This suggests that LLY carries a moderate level of risk compared to its peers.

  • Risk-Adjusted Performance:

    • Eli Lilly & Co. (LLY) generally exhibited higher Sharpe ratios compared to Pfizer Inc. (PFE) and Johnson & Johnson (JNJ), indicating better risk-adjusted returns. Pfizer Inc. (PFE) often had negative Sharpe ratios, suggesting poor risk-adjusted performance.
    • The beta values for Eli Lilly & Co. (LLY), Pfizer Inc. (PFE), and Johnson & Johnson (JNJ) are generally below 1, indicating that these stocks are less volatile than the overall market. Eli Lilly & Co. (LLY) has higher beta values compared to Pfizer Inc. (PFE) and Johnson & Johnson (JNJ), suggesting it is more sensitive to market movements than its peers.

  • Overall Assessment:

    • Eli Lilly & Co. (LLY) has demonstrated strong historical performance over the medium to long term, providing higher returns and better risk-adjusted returns compared to Pfizer Inc. (PFE) and Johnson & Johnson (JNJ). However, LLY's higher volatility and recent underperformance in shorter time frames suggest that it may be a riskier investment option. Pfizer Inc. (PFE) has struggled, showing negative returns and poor risk-adjusted performance. Johnson & Johnson (JNJ) offers a more stable but less lucrative investment profile.
    • Recent trends indicate that LLY's Sharpe ratio has decreased, while PFE's has shown some improvement but remains negative. Johnson & Johnson (JNJ)'s Sharpe ratio has remained relatively stable.
Peers Fundamentals(as of 2024-12-31)
Pfizer Inc. (PFE)Johnson & Johnson (JNJ)

  1. Market Position and Size:

    • Eli Lilly & Co. (LLY) has a significantly larger market capitalization (794007.15) than both Pfizer Inc. (PFE) (149045.71) and Johnson & Johnson (JNJ) (394323.76), indicating a dominant market position.
    • While LLY's revenue (45042.7) is less than PFE (63627) and JNJ (88819), its net income (10590) is greater than PFE (8020) but less than JNJ (14066). This suggests higher profitability relative to revenue for LLY compared to PFE.
    • LLY's dominant market position is supported by its high valuation metrics, reflecting investor confidence in its future growth and profitability.

  2. Profitability and Efficiency:

    • Eli Lilly & Co. (LLY) has a higher Gross Profit Margin (81.31%) compared to Pfizer Inc. (PFE) (66.76%) and Johnson & Johnson (JNJ) (68.71%), as well as the industry average (-817.71%).
    • LLY also exhibits a higher EBITDA Margin (41.75%) compared to PFE (37.95%) and JNJ (31.79%), as well as the industry average (-480807.47%).
    • Similarly, LLY's Net Profit Margin (23.51%) is higher than PFE (12.6%) and JNJ (15.84%), as well as the industry average (-447803.04%).
    • LLY's superior profit margins indicate a strong ability to convert revenue into profit, suggesting efficient cost management and a focus on high-margin products.
    • LLY outperforms its peers and the industry average in all profitability metrics, demonstrating strong financial performance.

  3. Financial Health and Stability:

    • Eli Lilly & Co. (LLY) has a Current Ratio of 1.15, which is slightly lower than Pfizer Inc. (PFE) at 1.17 but higher than Johnson & Johnson (JNJ) at 1.11. All three companies have significantly lower current ratios than the industry average of 6.91.
    • LLY's Quick Ratio is 0.89, slightly lower than PFE's 0.92 and slightly higher than JNJ's 0.86. All three companies have significantly lower quick ratios than the industry average of 6.75.
    • LLY has a significantly higher Total Debt to Total Equity Ratio of 237.06 compared to PFE (75.95) and JNJ (52.92). LLY's debt to equity ratio is also higher than the industry average of 132.02, while PFE and JNJ are lower.
    • LLY's Debt / EBITDA ratio is 1.79, which is lower than PFE's 2.67 but higher than JNJ's 1.3. All three companies have lower debt/EBITDA ratios than the industry average of 6.24.
    • LLY's liquidity ratios are slightly below its peers, and its high debt-to-equity ratio suggests a more leveraged financial structure. However, its Debt/EBITDA ratio is reasonable, and its cash flow coverage of debt is strong, indicating that it can manage its debt obligations.

  4. Valuation and Market Perception:

    • Eli Lilly & Co. (LLY) has significantly higher valuation metrics compared to its peers, Pfizer Inc. (PFE) and Johnson & Johnson (JNJ).
    • LLY's Enterprise Value To Sales ratio is 16.91, much higher than PFE (3.11) and JNJ (4.11), but lower than the industry average (9024.47).
    • LLY's Enterprise Value To EBITDA ratio is 40.51, considerably higher than PFE (8.1) and JNJ (12.9), but lower than the industry average (49.89).
    • LLY's Price To Earnings ratio is 71.5, significantly higher than PFE (18.65) and JNJ (28.26), but lower than the industry average (174.96).
    • LLY's Price to Book Ratio is 55.92, substantially higher than PFE (1.69) and JNJ (5.51), and higher than the industry average (8.1).
    • LLY's Price To Sales Ratio is 16.81, much higher than PFE (2.35) and JNJ (4.48), but lower than the industry average (12402.37).
    • LLY's high valuation metrics suggest that the market has high expectations for its future growth and profitability, potentially driven by its strong pipeline of new drugs and therapies.

  5. Cash Flow and Capital Management:

    • Eli Lilly & Co. (LLY) has a Net Operating Cash Flow of 8817.9, which is less than Pfizer Inc. (PFE) at 12744 and Johnson & Johnson (JNJ) at 24266.
    • LLY's Total Capital Expenditure is 8403.6, which is greater than PFE at 2909 and JNJ at 4424.
    • LLY's Free Cash Flow is 414.3, which is significantly less than PFE at 9835 and JNJ at 19842.
    • Despite having a large market capitalization, LLY's free cash flow generation is relatively weak compared to its peers, potentially due to its higher capital expenditure.
    • LLY's Cash Conversion Ratio is 1.78, which is greater than PFE at 0.06 and JNJ at 0.49, and greater than the industry average of 1.2. This indicates LLY is more efficient at converting revenue to cash.

  6. Growth and Future Prospects:

    • Eli Lilly & Co. (LLY) shows consistently higher growth in Sales/Revenue, EBITDA, Net Income, and Basic Earnings per Share compared to the peer group average.
    • LLY's Free Cash Flow and Free Cash Flow Margin growth are consistently lower than the peer group average.
    • LLY's 3-year and 5-year CAGR figures are generally higher than the peer group average for Sales/Revenue, EBITDA, Net Income, Basic Earnings per Share, and EBIT Margin.
    • LLY's 3-year and 5-year CAGR figures are lower than the peer group average for Free Cash Flow and Free Cash Flow Margin.
    • LLY's superior growth in key financial metrics suggests a strong competitive position and potential for future market share gains.
    • LLY's most recent year-over-year growth rates are higher than its 5-year CAGRs for Sales/Revenue, EBITDA, Net Income, Basic Earnings per Share, and EBIT Margin, indicating an acceleration of growth.
    • LLY's growth is primarily concentrated in its income statement metrics, with weaker growth in free cash flow.

  7. Potential for Investment:

    • Eli Lilly & Co. (LLY) presents a mixed investment profile. Its high profitability, strong returns, and superior growth in key financial metrics make it an attractive investment.
    • However, its relatively weak free cash flow generation, high debt levels, and high valuation metrics are potential concerns.
    • Investors should carefully consider LLY's growth prospects, pipeline of new drugs, and ability to manage its debt obligations before making an investment decision.

  8. Key Risks and Considerations:

    • High Debt Levels: LLY's higher debt-to-equity ratio compared to peers could pose a risk if the company faces financial difficulties or rising interest rates.
    • Weak Free Cash Flow: LLY's relatively weak free cash flow generation compared to its peers could limit its ability to invest in future growth opportunities or return capital to shareholders.
    • High Valuation: LLY's high valuation metrics may indicate that the stock is overvalued, making it vulnerable to market corrections.
    • Pipeline Risk: As a pharmaceutical company, LLY faces the risk of drug development failures and regulatory hurdles, which could negatively impact its future growth prospects.

  9. Overall Assessment:

    • Eli Lilly & Co. (LLY) is a financially strong company with a dominant market position, superior profitability, and strong growth prospects.
    • However, its high debt levels, weak free cash flow generation, and high valuation metrics are potential concerns that investors should carefully consider.
    • Overall, LLY appears to be a well-managed company with a bright future, but its high valuation suggests that much of its future growth is already priced into the stock.
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