Is There Still Value in Lilly After a 36% Jump and Analyst Upgrades in 2025?

• Wondering if Eli Lilly's impressive momentum still leaves room for value for new investors? You're not alone, and it's a good question to consider.
• Shares of Eli Lilly have soared, jumping 3.4% in the last week and an eye-popping 36.2% year-to-date. This signals renewed optimism and may shift the balance of risk and reward.
• Recent news has kept this stock in focus, including regulatory progress on new drug candidates and analyst upgrades that reflect growing confidence in the company's pipeline. These developments help explain the brisk movement in the stock’s price and have drawn attention from both growth-oriented and cautious investors.
• Eli Lilly currently scores just 1 out of 6 on our valuation checks, which may surprise those impressed by its strong share performance. Next, we will break down what factors contribute to this score and compare common ways to assess value. Stay tuned for a broader perspective at the end of the article.

Eli Lilly scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Eli Lilly Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's worth by projecting its future cash flows and then discounting those amounts back to today's value, reflecting the time value of money. This approach aims to identify what the business could be worth based on its ability to generate cash over the long term.

For Eli Lilly, current Free Cash Flow stands at approximately $6.15 billion. Analysts provide detailed projections for the next five years, with annual FCF expected to rise quickly and surpass $17.56 billion in 2026. It may potentially reach $35.81 billion by 2029. After that point, models extrapolate additional growth out to 2035 based on historical trends and sector expectations. All cash flow figures are reported in U.S. dollars ($).

Using this 2 Stage Free Cash Flow to Equity model, the estimated intrinsic value of Eli Lilly's stock is $1,169 per share. When compared to the current share price, this suggests the stock is about 9.3% undervalued.

Result: ABOUT RIGHT

Eli Lilly is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

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

Approach 2: Eli Lilly Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used metric to value profitable companies like Eli Lilly, as it directly links a firm’s market value with its earnings. For established businesses generating steady profits, the PE ratio offers a window into how much investors are willing to pay for each dollar of earnings, which can reflect expectations about future growth and perceived risk.

Determining what qualifies as a “normal” or “fair” PE ratio is not always straightforward. Companies expected to grow more rapidly or with significant competitive advantages can command higher PE ratios, while those facing more risk or slower growth typically trade at lower multiples. The pharmaceutical industry, for comparison, has an average PE ratio of 19.9x. Eli Lilly’s peers average around 15.6x. At present, Eli Lilly’s own PE ratio sits notably higher at 51.5x.

To provide deeper context, Simply Wall St uses a proprietary “Fair Ratio,” which for Eli Lilly is calculated at 43.8x. Unlike standard peer or industry comparisons, the Fair Ratio is tailored to the company’s unique earnings growth potential, risk factors, profit margins, industry positioning, and overall size. This makes it a more nuanced benchmark than generic averages.

Comparing Eli Lilly’s current PE ratio (51.5x) to its Fair Ratio (43.8x), the stock is trading well above its fundamental value, suggesting that market optimism may have run ahead of what is justified by its growth outlook and risk profile.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1422 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Eli Lilly Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is your story about a company. It’s how you connect the numbers (like revenue, earnings, and margins) with the business context, future prospects, and your own assumptions about what’s probable. Narratives allow you to outline your reasoning behind an estimated fair value, showing how your unique perspective interprets new information, risks, and growth drivers.

On Simply Wall St’s Community page, millions of investors use Narratives to forecast a company’s future. They then compare those outlooks directly with today’s price to decide if they see value, risk, or opportunity. Because Narratives update as soon as new news or earnings come out, they help you stay current and make smarter, more dynamic decisions about when to buy or sell.

For example, one Eli Lilly Narrative projects a fair value as high as $1,190 per share thanks to explosive GLP-1 drug growth and long patent protection. Another, more cautious Narrative values the stock at only $650, citing risks like regulatory price pressures and intensifying competition. By exploring and building your own Narrative, you can see where your perspective fits on the spectrum and make investment choices that are more informed and personal.

For Eli Lilly, we'll make it easy for you with previews of two leading Eli Lilly narratives:

🐂 Eli Lilly Bull Case

Fair Value: $1,189.18

Current valuation: 10.9% undervalued compared to last close

Expected annual revenue growth: 20%

• GLP-1 drugs Mounjaro and Zepbound drive aggressive sales growth. U.S. market protectionism and patent protection set up years of exclusivity for Lilly.
• Market penetration for GLP-1s is still only about 4% of the target population in the U.S. Increasing insurance coverage and production capacity are expected to drive further upside.
• Risks include high current drug prices, possible delays in new facility construction, and increased competition. Forecast models project strong double-digit revenue growth and a fair value near $1,200 per share.

🐻 Eli Lilly Bear Case

Fair Value: $1,003.15

Current valuation: 5.7% overvalued compared to last close

Expected annual revenue growth: 16.8%

• Rapid growth in key obesity and diabetes drugs plus innovation in pipeline therapies underpin growth, but the company depends heavily on a few blockbuster products for earnings momentum.
• Intensifying regulatory and pricing pressures, potential patent expirations, and ongoing reimbursement debates pose significant risks to margins and long-term revenue expansion.
• Consensus analyst price targets reflect a positive long-term outlook. Sustaining current valuation will require above-industry-average growth, margin expansion, and resilience to competition and policy changes.

Do you think there's more to the story for Eli Lilly? 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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