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LLY

Eli Lilly NYSE:LLY Stock Report

Last Price

US$331.78

Market Cap

US$313.5b

7D

-0.8%

1Y

45.6%

Updated

05 Oct, 2022

Data

Company Financials +
LLY fundamental analysis
Snowflake Score
Valuation2/6
Future Growth5/6
Past Performance1/6
Financial Health3/6
Dividends4/6

LLY Stock Overview

Eli Lilly and Company discovers, develops, and markets human pharmaceuticals worldwide.

Eli Lilly and Company Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Eli Lilly
Historical stock prices
Current Share PriceUS$331.78
52 Week HighUS$341.70
52 Week LowUS$226.05
Beta0.38
1 Month Change10.11%
3 Month Change1.17%
1 Year Change45.61%
3 Year Change209.21%
5 Year Change285.52%
Change since IPO1,830.36%

Recent News & Updates

Sep 26

EEOC sues Lilly USA, alleging nationwide age discrimination

Lilly USA, part of Eli Lilly (NYSE:LLY), was sued by the Equal Employment Opportunity Commission over allegations of nationwide age discrimination. The Indianapolis-based company violated federal law by intentionally failing to hire older workers to pharmaceutical sales rep positions from April 2017 to 2021, according to the EEOC. That stems from the company's recognition that Lilly's workforce was mostly older workers, and announced goals for "early career" hiring to bring in more millennials. The Age Discrimination in Employment Act prohibits discriminating against applicants 40 and over. The EEOC says it's brought suit after first attempting to reach a prelitigation settlement; it's seeking back pay and liquidated damages, as well as injunctive relief. “This case underscores the continued need for the EEOC to break down barriers to employment for those older workers," says the EEOC's Robert Weisberg.

Sep 17

Plain And Simple: Eli Lilly Is Overvalued

Summary Eli Lilly has several products with growth potential and especially recently introduced Mounjaro could reach blockbuster status quickly. The company is also a recession-resilient business. Eli Lilly reported mediocre quarterly results. The results themselves are not a problem, but don't match a company trading for 50 times free cash flow. The stock is clearly overvalued and is facing a huge downside risk. My last article about Eli Lilly and Company (LLY) was published in August 2021. Back then I rated Eli Lilly as a sell, but the stock increased about 19% in the meantime and clearly outperformed the S&P 500 (SPY), which declined almost 13% during the same timeframe. And although my rating was clearly wrong one year ago, I remain bearish about Eli Lilly and will argue once again why the stock remains rather a sell - at least for the next few years - despite the solid and recession-resilient business model. And although Eli Lilly will probably be able to increase revenue during the next recession (due to several recently introduced great products), the stock is not a good investment and will face huge downside risk in the coming quarters. Growth Potential But let's start with the positive aspects about Eli Lilly and look at the last few years in which the company introduced several key growth products that reached blockbuster status. And in the last five years, Eli Lilly could grow revenue with a solid CAGR of 6% and management is seeing continued strong demand for these products. During the last earnings call, CEO David A. Ricks actually announced two new manufacturing sites: Last month, we announced plans for a $2.1 billion investment in 2 new manufacturing sites here in Indiana to support increasing demand for existing products as well as demand for potential new medicines in our pipeline. Eli Lilly Q2/22 Presentation With these key growth products getting more and more important, revenue from these products that have been introduced since 2014 was about 66% of total revenue (in the second quarter of fiscal 2022). And it is good to know that many of these products are still patent-protected - Trulicity for example has still compound patents till 2027 and biologics data protection until 2026. Taltz is also protected by compound patents till 2023 and by biologics data protection until 2028. Jardiance is protected by a compound patent until 2028 as well (patent protection data for the United States). Eli Lilly Annual Report 2021 Recently, Eli Lilly launched another potential blockbuster - Mounjaro, which was approved for the treatment of type 2 diabetes. In the second quarter, it only generated $16 million in sales, but analysts are not only expecting Mounjaro to become a blockbuster - peak sales estimates range from about $5 billion to about $13 billion. And when looking at competitor Novo Nordisk (NVO) and sales for Ozempic (which is comparable), these estimates are not completely unrealistic. Ozempic sales in the first half of 2022 were DKK 26.38 billion ($3.55 billion at current exchange rates) and Ozempic sales were still growing 87% (reported numbers) and 73% in constant exchange rates. At this point it seems likely for Ozempic to generate $10 billion in sales and Eli Lilly might be able to reach similar levels with Mounjaro. Eli Lilly Diabetes & Obesity ADA Presentation In June 2022, during a presentation for the American Diabetes Association (ADA), Eli Lilly announced that its prior focus was on people with diabetes and the goal was to improve and simplify glycemic control. But now the focus is on diabetes and obesity and Eli Lilly is going down a similar path Novo Nordisk has already entered a few years ago. Both companies are emphasizing that obesity is a gigantic problem (and a gigantic market). Over 40% of the U.S. population is living with obesity, but only fewer than 3% of people are pharmacologically treated and the negative economic impact associated with obesity is over $1 trillion. Eli Lilly Diabetes & Obesity ADA Presentation And similar to Novo Nordisk, which is selling semaglutide under the brand name Ozempic (for type 2 diabetes) as well as Wegovy (for obesity care), Eli Lilly is trying to do the same with tirzepatide. Aside from getting it approved to treat type 2 diabetes (Mounjaro), Eli Lilly might also try to approve it for obesity treatment and try to enter the market in which Novo Nordisk is already quite successful. Eli Lilly 2021 Investment Community Meeting Presentation But growth expectations in the next few years are not just relying on Mounjaro. Eli Lilly is expecting to launch four more blockbuster products in the next few quarters and two of them are expected to generate at least $3 billion in peak sales. Recession-resilient Business Eli Lilly seems like the typical recession-resilient business. It is a healthcare company producing pharmaceuticals and these are products that must be purchased during every economic condition. Even with disposable income declining and people cutting spendings on many other products and services, people still get sick (probably even more during recessions) and will have to buy pharmaceuticals. And as Eli Lilly is offering pharmaceuticals mostly for chronic illnesses - like diabetes - people will have no choice but continue purchasing pharmaceuticals (like insulin). LLY Revenue ((TTM)) data by YCharts When looking at the performance during the last few decades, we can see revenue declining on several different occasions. But the declining revenue can't really be associated with a recession. And while earnings per share declined during a recession on several occasion, earnings per share seem to fluctuate quite a bit in the last few decades. Eli Lilly is certainly not a business growing earnings per share with stability and consistency, but it seems to be able to handle recessions quite well. Quarterly Results When looking for bad news we don't have to look very far and can start with the last quarterly results. Revenue in the second quarter of fiscal 2022 declined 3.7% year-over-year from $6,740 million in Q2/21 to $6,488 million in Q2/22. Operating income also declined from $1,403 million in the same quarter last year to $1,210 million this quarter - a decline of 13.8% YoY. And diluted earnings per share declined even 31.4% from $1.53 in Q2/21 to $1.05 in Q2/22. Eli Lilly Q2/22 Presentation And although exchange rates had a negative effect on the top line, revenue also decreased slightly on a constant currency basis. The reasons were lower realized prices and especially lower revenue for Alimta (because of the entry of generics). Eli Lilly also had to lower its guidance for fiscal 2022. While revenue is still expected to be in a range between $28.8 billion and $29.3 billion the company is now expecting earnings per share to be in a range between $6.96 and $7.11 (instead of $7.30 to $7.45 before). However, the guidance was not lowered due to fundamental reasons, but rather due to other factors like foreign exchange rates. Eli Lilly Q2/22 Presentation Of course, one mediocre quarter and lowered guidance is not reason enough to make Eli Lilly a bad company. However - and this is important - a business trading for 56 times free cash flow is expected to grow with a high pace and high consistency. In my opinion, a valuation multiple above 50 can't hardly be justified, but when trying to justify it, extremely high and especially consistent growth would be a good starting point. Intrinsic Value Calculation In the last ten years, Eli Lilly was seldom cheap. On average, the stock was trading for 33 times free cash flow and considering that Eli Lilly is now trading for almost twice that P/FCF ratio it must be called extremely expensive. In retrospect one can say investing in Eli Lilly in the past few years was a good idea as the stock increased (and outperformed the S&P 500). But considering the P/FCF ratio in the last few years, investing in Eli Lilly was not always a good idea. The price-free-cash-flow ratio is indicating that investors might have overpaid in the last few quarters. LLY Price to Free Cash Flow data by YCharts We can also try to determine an intrinsic value by using a discount cash flow calculation. As basis we can use the free cash flow of the last four quarters, which was $5,743 million. When taking 902.9 million in diluted outstanding shares and a 10% discount rate, Eli Lilly must grow its free cash flow about 15.5 % annually for the next ten years (followed by 6% growth till perpetuity) to be fairly valued right now. Seeking Alpha Eli Lilly EPS Estimates When looking at the growth potential Eli Lilly has in the years to come, we have every right to be bullish about the fundamental business, but these growth rates seem overly optimistic, and I don't think Eli Lilly will be able to achieve them. When looking at analysts' assumptions for the years to come, they expect earnings per share to grow with a CAGR of "only" 11.5% in the next ten years and these assumptions can already be described as optimistic. When calculating with 11.5% growth for the next ten years (all other assumptions being equal), the intrinsic value for Eli Lilly would be $234.60 and the stock is clearly overvalued. No matter, how we spin it, Eli Lilly is clearly overvalued at this point, and I see almost no way how the company can achieve growth rates in the low-to-mid teens in the next ten years. Eli Lilly can continue to purchase shares in the years to come, but at current stock prices this is not only a horrible idea, it has to spend a lot of money to make a significant impact on earnings per share growth. And when looking at margins in the last 30 years, I don't see much room to improve margins as the operating margin is already rather high.

Shareholder Returns

LLYUS PharmaceuticalsUS Market
7D-0.8%2.6%4.4%
1Y45.6%5.8%-18.2%

Return vs Industry: LLY exceeded the US Pharmaceuticals industry which returned 5.8% over the past year.

Return vs Market: LLY exceeded the US Market which returned -18.2% over the past year.

Price Volatility

Is LLY's price volatile compared to industry and market?
LLY volatility
LLY Average Weekly Movement4.2%
Pharmaceuticals Industry Average Movement11.3%
Market Average Movement6.9%
10% most volatile stocks in US Market15.5%
10% least volatile stocks in US Market2.8%

Stable Share Price: LLY is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: LLY's weekly volatility (4%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
187635,000Dave Rickshttps://www.lilly.com

Eli Lilly and Company discovers, develops, and markets human pharmaceuticals worldwide. It offers Basaglar, Humalog, Humalog Mix 75/25, Humalog U-100, Humalog U-200, Humalog Mix 50/50, insulin lispro, insulin lispro protamine, insulin lispro mix 75/25, Humulin, Humulin 70/30, Humulin N, Humulin R, and Humulin U-500 for diabetes; and Jardiance, Trajenta, and Trulicity for type 2 diabetes. The company provides Alimta for non-small cell lung cancer (NSCLC) and malignant pleural mesothelioma; Cyramza for metastatic gastric cancer, gastro-esophageal junction adenocarcinoma, metastatic NSCLC, metastatic colorectal cancer, and hepatocellular carcinoma; Erbitux for colorectal cancers, and various head and neck cancers; Retevmo for metastatic NSCLC, medullary thyroid cancer, and thyroid cancer; Tyvyt for relapsed or refractory classic Hodgkin’s lymph and non-squamous NSCLC; and Verzenio for HR+, HER2- metastatic breast cancer, node positive, and early breast cancer.

Eli Lilly and Company Fundamentals Summary

How do Eli Lilly's earnings and revenue compare to its market cap?
LLY fundamental statistics
Market CapUS$313.45b
Earnings (TTM)US$5.69b
Revenue (TTM)US$29.07b

55.4x

P/E Ratio

10.8x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
LLY income statement (TTM)
RevenueUS$29.07b
Cost of RevenueUS$7.15b
Gross ProfitUS$21.92b
Other ExpensesUS$16.23b
EarningsUS$5.69b

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

Nov 01, 2022

Earnings per share (EPS)5.99
Gross Margin75.41%
Net Profit Margin19.58%
Debt/Equity Ratio195.2%

How did LLY perform over the long term?

See historical performance and comparison

Dividends

1.2%

Current Dividend Yield

58%

Payout Ratio