Is Elanco Animal Health Still a Bargain After Its 78% Surge in 2025?

• Curious if Elanco Animal Health stock is a hidden gem or already priced for perfection? You are not alone. It may be worth taking a closer look at its current valuation story.
• While the stock dipped 3.0% over the last week, it has surged an impressive 78.3% year-to-date and 52.7% in the past year. This suggests shifting market sentiment and renewed optimism.
• Much of this momentum has been driven by enthusiasm around Elanco’s strategic moves in animal healthcare innovation and recent regulatory milestones. These developments have fueled investor confidence and kept the market attentive to what may come next.
• By our metrics, Elanco earns a valuation score of 5 out of 6 for being undervalued on most checks we track. We will break down how that score is calculated next, along with an additional method to evaluate Elanco’s true worth later in the article.

Elanco Animal Health delivered 52.7% returns over the last year. See how this stacks up to the rest of the Pharmaceuticals industry.

Approach 1: Elanco Animal Health Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future free cash flows and then discounting those amounts back to today’s value. This method helps investors assess what a business is truly worth, independent of short-term market sentiment.

For Elanco Animal Health, the most recent reported Free Cash Flow is $420.9 million. Analyst estimates suggest growth in future cash flows, projecting these to reach approximately $677 million by 2029. Since analyst forecasts typically only extend five years, projections out to 2035 are calculated by further extrapolating growth trends by Simply Wall St.

Based on these detailed cash flow forecasts and the application of a two-stage DCF approach, Elanco’s intrinsic fair value is calculated at $31.15 per share. Comparing this to the current market price, the model indicates that the stock is trading at a 31.0% discount to its estimated true worth. In other words, by this measure, Elanco appears to be undervalued today.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Elanco Animal Health is undervalued by 31.0%. Track this in your watchlist or portfolio, or discover 870 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Elanco Animal Health.

Approach 2: Elanco Animal Health Price vs Sales

The Price-to-Sales (P/S) ratio is a popular metric for valuing companies, especially when profits are limited or earnings fluctuate significantly from year to year. It is particularly relevant for firms like Elanco Animal Health, where sales growth and consistent revenue generation are core to the business’s long-term story, even if profits haven’t yet reached maturity.

Growth prospects and risk profile both play a major role in what investors consider a “normal” or “fair” P/S ratio. Typically, companies with stronger revenue growth and lower risk profiles can command higher multiples, while more mature or riskier businesses trade at lower ratios.

Currently, Elanco’s P/S ratio sits at 2.33x. For context, the industry average for Pharmaceuticals is 3.94x, while Elanco’s peer group trades at an average of 5.05x. At first glance, this could make Elanco appear undervalued compared to both peers and the broader industry.

This is where Simply Wall St’s “Fair Ratio” comes in. It sets expectations for a reasonable P/S multiple based on a blend of meaningful factors like the company’s growth outlook, risk profile, profit margins, industry characteristics, and market cap. Unlike a basic comparison to industry or peers, the Fair Ratio incorporates all of these nuances to deliver a fairer benchmark. For Elanco, the Fair Ratio is calculated at 4.39x.

Since Elanco’s current P/S ratio of 2.33x is notably below the Fair Ratio, the stock looks undervalued when considering its future potential and specific business traits beyond simple benchmarking.

Result: UNDERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1396 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Elanco Animal Health Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is a simple and powerful concept. It is your story for a company, where you outline your perspective behind the numbers, setting your own assumptions for fair value and expectations for future revenue, earnings, and profit margins. Narratives connect these real business dynamics with a financial forecast and ultimately a fair value estimate, helping you tie what is happening at Elanco Animal Health to actionable investment signals.

With Narratives on Simply Wall St’s Community page, millions of investors can quickly build or follow a Narrative to see how their assumptions stack up. Instead of just comparing ratios, you use a Narrative to decide whether to buy or sell by tracking the gap between your fair value and the market price. As Narratives update dynamically with every new earnings release or news item, your story adapts as the market does. For example, one investor might see Elanco’s recent product launches and debt reductions as grounds for a fair value of $21 per share, while another, more cautious on margin pressures and FX risks, may set their fair value closer to $14. Narratives help make your investment decisions clearer and more responsive to what matters most to you.

Do you think there's more to the story for Elanco Animal Health? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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