Eli Lilly currently trades at $926.10 and has been a dream stock for shareholders. It’s returned 386% since April 2021, blowing past the S&P 500’s 70.2% gain. The company has also beaten the index over the past six months as its stock price is up 14.5% thanks to its solid quarterly results.
Is it too late to buy LLY? Find out in our full research report, it’s free.
Why Are We Positive On LLY?
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
Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Eli Lilly grew its sales at an excellent 21.6% compounded annual growth rate. Its growth surpassed the average healthcare company and shows its offerings resonate with customers.
2. Adjusted Operating Margin Rising, Profits Up
Adjusted operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies because it excludes non-recurring expenses, interest on debt, and taxes.
Analyzing the trend in its profitability, Eli Lilly’s adjusted operating margin rose by 21.2 percentage points over the last two years, as its sales growth gave it immense operating leverage. Its adjusted operating margin for the trailing 12 months was 41.8%.
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 25% compounded annual growth rate over the last five years, higher than its 21.6% 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 Eli Lilly is one of the best healthcare companies out there, and with its shares beating the market recently, the stock trades at 27.2× forward P/E (or $926.10 per share). Is now the right time to buy? See for yourself in our full research report, it’s free.
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