A compelling motive for stock investments in Eli Lilly (LLY) presented here.
Eli Lilly, a leading pharmaceutical company, has shown impressive growth over the past decade, with an average annual gain of 25.1% in its stock price. Despite a recent setback with its weight loss drug orforglipron, analysts remain optimistic about the company's future.
The company's current price-to-earnings (P/E) ratio of 61 is slightly above its five-year average of 50, reflecting a high valuation. However, this hasn't deterred analysts, who forecast continued robust revenue and earnings growth.
Key financial projections for the next several years include:
- In 2025, a predicted P/E ratio of around 60, with EPS of $19.11, leading to a price target near $763.16. Revenue growth is forecast at about 18.37% to $52.8 billion, and net income at $17.29 billion.
- From 2026 to 2028, the P/E ratio is expected to stabilise at 50, with EPS rising to $25.03 in 2026, $30.39 in 2027, and around $25.97 in 2028. This progressively higher price targets could push the stock price over $1,060 by 2028.
Analysts' consensus price targets vary, with some estimating an average target around $950 for 2025, indicating upside potential from recent trading levels near $700. Revenue growth is projected to remain strong, with some forecasts expecting a 34% top-line growth in 2025 and sustained double-digit growth driven by key products like Mounjaro for diabetes and weight loss.
The recent disappointing results for the weight loss drug have not significantly dampened long-term growth expectations, as overall pipeline strength and a diversified portfolio underpin favourable analyst outlooks.
Eli Lilly's success is not limited to weight loss and diabetes drugs. The company's cancer drug Verzenio is promising, and the firm boasts a solid portfolio of drugs and drugs in development.
Investing in Eli Lilly's stock over a long term could be a lucrative move. A $10,000 investment in 2010 would have been worth $94,204 after a decade, and had dividends been reinvested, the average gain would have been 26.9%. This reinvested $10,000 investment would have been worth $108,082 after a decade.
My colleague Keith Speights suggests that Eli Lilly might become the first healthcare company to cross the $1 trillion mark in market value. While the stock currently seems a bit richly priced, it's not wildly overpriced given the company's strong performance and promising future.
However, it's essential to note that any investment carries risk, and past performance is not a guarantee of future results. Always do your own research or consult with a financial advisor before making investment decisions.
[1] Yahoo Finance [2] Zacks Investment Research [3] FiercePharma [4] The Motley Fool
- Despite the recent setback with its weight loss drug, analysts remain optimistic about Eli Lilly's future, forecasting continued robust revenue and earnings growth, resulting in a possible P/E ratio of around 60 in 2025 with a price target near $763.16.
- Given Eli Lilly's impressive performance and promising future, investing in its stock over a long term could be a lucrative move, as a $10,000 investment in 2010 would have been worth $94,204 after a decade, even without reinvesting dividends, and the reinvested $10,000 investment would have been worth $108,082.
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