Since April 2025, Eli Lilly has been in a holding pattern, posting a small loss of 2.2% while floating around $811. The stock also fell short of the S&P 500’s 24.7% gain during that period.
Does this present a buying opportunity for LLY? Or is its underperformance reflective of its story and business quality? Find out in our full research report, it’s free for active Edge members.
Why Are We Positive On Eli Lilly?
Founded in 1876 by a Civil War veteran and pharmacist frustrated with the poor quality of medicines, Eli Lilly (NYSE: LLY) discovers, develops, and manufactures pharmaceutical products for conditions including diabetes, obesity, cancer, immunological disorders, and neurological diseases.
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, Eli Lilly’s sales grew at an impressive 18.3% compounded annual growth rate over the last five years. Its growth surpassed the average healthcare company and shows its offerings resonate with customers.
2. Economies of Scale Give It Negotiating Leverage with Suppliers
Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.
With $53.26 billion in revenue over the past 12 months, Eli Lilly is one of the most scaled enterprises in healthcare. This is particularly important because branded pharmaceuticals companies are volume-driven businesses due to their low margins.
3. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Eli Lilly’s EPS grew at an astounding 21.5% compounded annual growth rate over the last five years, higher than its 18.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Final Judgment
These are just a few reasons why we're bullish on Eli Lilly. With its shares trailing the market in recent months, the stock trades at 29.8× forward P/E (or $811 per share). Is now a good time to initiate a position? See for yourself in our full research report, it’s free for active Edge members.
Stocks We Like Even More Than Eli Lilly
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