Stock Analysis & Ideas

Eli Lilly Stock: Not Attractive Relative to Peers

After reviewing pharmaceutical companies Pfizer (PFE) and Eli Lilly (LLY) back-to-back, I think both are great companies, but Pfizer gets my vote for where to invest your hard-earned capital. I am bearish on LLY stock.

For those of you who follow my work, this will not be a surprise, I like to listen to earnings calls, investor presentations, and company presentations at events like the J.P. Morgan Healthcare Conference held in the middle of January, and I listened to those same calls and conferences held by Eli Lilly.

What really surprised me and turned me off to making an investment in this company is that it has not presented (anywhere that I can find) a roadmap on how it is preparing for genetic medicines. Or in other words, LLY has no plan for how to move into genetic medicines that will be personalized for each patient. 

Pfizer, BioNTech (BNTX), Moderna (MRNA), Ionis (IONS), Vertex (VRTX), and Merck (MRK) are the companies that are pushing the next frontier of medicine, and I feel they are where your growth-oriented investment dollars should be allocated.

That being said, LLY is a great company and should continue to pay out dividends at an ever-increasing rate (at least for the next decade), but I feel that Pfizer will be not only able to do the same things but also be able to capitalize on its strategic genetic roadmap where it is in the middle of the next wave of new medicines that change lives.

As a measure of how to quantify the differences between the two companies, LLY received a 4 (neutral) rating, while Pfizer received a perfect 10 (outperform) rating in the TipRanks Stock Analysis Overview.  

I also like that PFE pays out an over 3.4% dividend, whereas LLY is only paying out a 1.54% dividend at current prices. 

When comparing the two companies head-on, I do not see one reason to invest in LLY instead of PFE. Both are of similar size (LLY has a ~$242 billion market cap and PFE has a ~$263 billion market cap), both regularly increase their dividends, and both are in the same industry. PFE is just a better engine to create wealth for their investors over the next decade, in my opinion. 

Recent Results and Dividend

Eli Lilly’s stock has been trading between $178.58 (the 52-week low set on March 25th, 2021) and $283.91 (the 52-week high set on December 16, 2021). 

LLY brought in revenues of $28.3 billion over the last 12 months and net income of $5.6 billion over the same period.

The company reported fourth-quarter earnings of $2.49 per share, beating analyst estimates of $2.45 per share by $0.04. It also reported $8.17 in earnings per share for 2021, missing analyst estimates of $8.42 by $0.25 during that period. 

LLY currently pays a dividend of $0.98 per quarter. This is a dividend yield of 1.54%; LLY’s dividend has grown consistently for the past eight years.

The company has a solid balance sheet. It has a current ratio of 1.23, so it has enough current assets on hand to pay its bills for the next year and one quarter.  

When I calculated the stock’s intrinsic value by modeling discounted cash flows, I pegged it at $360.85. However, I do not see a catalyst to drive the stock price higher.

Wall Street’s Take

Turning to Wall Street, LLY has a Moderate Buy consensus rating based on 11 Buys and four Hold ratings assigned in the past three months. At $291.53, the average Eli Lilly price target implies 15% upside potential.

TipRanks.com shows that 86% of the 22 bloggers that have blogged about LLY in the last three months are bullish, while only 69% of bloggers have been bullish on the Healthcare sector over the last three months. 

Conclusion

Based on the other companies LLY competes with, the dividend, and management’s plan for the future, I feel that there are much better investments for your hard-earned dollars. I think LLY is a pass. As such, I am bearish on this stock.

Download the TipRanks mobile app now

​To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Read full Disclaimer & Disclosure

Tired of arriving late to the Big Returns Party?​
Most investors don’t have major gainers like TSLA or NVDA on their radar from the start.
The profusion of opinions on social media and financial blogs makes it impossible to distinguish between real growth potential and pure hype.
​​For the past decade, we have developed and perfected technology designed to help private investors, just like you, find the best opportunities, with the greatest upside potential, in any financial climate.​
Learn More
Videos