Eli Lilly has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 6.5% to $1,149 per share while the index has gained 8.4%.
Is now a good time to buy LLY? Find out in our full research report, it’s free.
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
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, Eli Lilly’s 23.2% annualized revenue growth over the last five years was excellent. Its growth beat the average healthcare company and shows its offerings resonate with customers.
2. Adjusted Operating Margin Rising, Profits Up
Adjusted operating margin is a key measure of profitability. Think of it as net income (the bottom line) excluding the impact of non-recurring expenses, taxes, and interest on debt - metrics less connected to business fundamentals.
Analyzing the trend in its profitability, Eli Lilly’s adjusted operating margin rose by 22.9 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 45.3%.
3. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Eli Lilly’s EPS grew at 29.6% compounded annual growth rate over the last five years, higher than its 23.2% 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 think Eli Lilly is one of the best healthcare companies out there. At $1,149 per share (or 32.7× forward P/E), is now the right time to buy the stock? See for yourself in our comprehensive research report, it’s free.
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