Eli Lilly (NYSE:LLY) recently announced its plans to invest $27 billion in four new U.S. manufacturing plants over the next five years, creating thousands of jobs. This move comes at a time when the pharmaceutical industry is facing potential import tariffs on medications under the Trump administration.
LLY stock has fared well so far this year, up around 20%. At its current levels of $920, LLY looks attractive but volatile – making it a tricky pick to buy. We believe there is minimal cause for concern with LLY stock, which makes it attractive but highly sensitive to adverse events as its current valuation is extremely high.
We arrive at our conclusion by comparing the current valuation of LLY stock with its operating performance over the recent years as well as its current and historical financial condition. Our analysis of Eli Lilly along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a very strong operating performance and financial condition, as detailed below. Separately, see – What’s Happening With XRP’s Price?
How does Eli Lilly’s valuation look vs. the S&P 500?
Going by what you pay per dollar of sales or profit, LLY stock looks very expensive compared to the broader market.
• Eli Lilly has a price-to-sales (P/S) ratio of 17.8 vs. a figure of 3.1 for the S&P 500
• Additionally, the company’s price-to-operating income (P/EBIT) ratio is 48.2 compared to 24.4 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 120.8 vs. the benchmark’s 24.4
How have Eli Lilly’s revenues grown over recent years?
Eli Lilly’s Revenues have grown considerably over recent years.
• Eli Lilly has seen its top line grow at an average rate of 11.9% over the last 3 years (vs. 9.8% for S&P 500)
• Its revenues have grown 27.4% from $32 Bil to $41 Bil in the last 12 months (vs. change of 5.6% for S&P 500)
• Also, its quarterly revenues grew 20.4% to $11 Bil in the most recent quarter from $9.5 Bil a year ago (vs. 7.2% change for S&P 500)
How profitable is Eli Lilly?
Eli Lilly’s profit margins are higher than most companies in the Trefis coverage universe.
• Eli Lilly’s Operating Income over the last four quarters was $15 Bil, which represents a high Operating Margin of 37.0% (vs. 12.6% for S&P 500)
• Eli Lilly’s Operating Cash Flow (OCF) over this period was $6.0 Bil, pointing to a moderate OCF-to-Sales Ratio of 14.8% (vs. 14.4% for S&P 500)
Does Eli Lilly look financially stable?
Eli Lilly’s balance sheet looks strong.
• Eli Lilly’s Debt figure was $31 Bil at the end of the most recent quarter, while its market capitalization is $828 Bil (as of 2/28/2025). This implies a very strong Debt-to-Equity Ratio of 4.3% (vs. 19.7% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $3.4 Bil of the $79 Bil in Total Assets for Eli Lilly. This yields a poor Cash-to-Assets Ratio of 4.7% (vs. 14.1% for S&P 500)
How resilient is LLY stock during a downturn?
LLY stock has seen an impact that was slightly worse than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on LLY stock? Our dashboard How Low Can Eli Lilly Stock Go In A Market Crash? has a detailed analysis of how the stock performed during and after previous market crashes.
Inflation Shock (2022)
• LLY stock fell 37.4% from a high of $374.76 on 4 December 2022 to $234.69 on 14 February 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 13 April 2023
• Since then, the stock has increased to a high of $960.02 on 2 September 2024 and currently trades at around $920
Covid Pandemic (2020)
• LLY stock fell 16.9% from a high of $143.20 on 17 March 2020 to $119.05 on 23 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 8 April 2020
Global Financial Crisis (2008)
• LLY stock fell 53.1% from a high of $58.55 on 9 October 2007 to $27.47 on 5 March 2009, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 26 February 2014
Putting all the pieces together: What it means for LLY stock
In summary, Eli Lilly’s performance across the parameters detailed above are as follows:
• Growth: Extremely Strong
• Profitability: Strong
• Financial Stability: Strong
• Downturn Resilience: Neutral
• Overall: Very Strong
Hence, despite its extremely high valuation, the stock appears attractive but volatile, which supports our conclusion that LLY is a tricky stock to buy.
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