Shareholders Of Eli Lilly (NYSE:LLY) Must Be Happy With Their 230% Total Return

By
Simply Wall St
Published
March 14, 2021
NYSE:LLY

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Eli Lilly and Company (NYSE:LLY) share price has soared 193% in the last half decade. Most would be very happy with that. On top of that, the share price is up 30% in about a quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.

See our latest analysis for Eli Lilly

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the five years of share price growth, Eli Lilly moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
NYSE:LLY Earnings Per Share Growth March 14th 2021

It is of course excellent to see how Eli Lilly has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Eli Lilly stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Eli Lilly the TSR over the last 5 years was 230%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Eli Lilly provided a TSR of 52% over the last twelve months. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 27% per year over five year. It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Eli Lilly better, we need to consider many other factors. For example, we've discovered 2 warning signs for Eli Lilly that you should be aware of before investing here.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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This article by Simply Wall St is general in nature. 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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