Investors, Discover Key Insights on Eli Lilly and Company

It's been a great morning session for Eli Lilly and Company investors, who saw their shares rise 1.8% to a price of $755.07 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.

Trades Below Its Graham Number but Has an Elevated P/B Ratio:

Eli Lilly and Company discovers, develops, and markets human pharmaceuticals worldwide. The company belongs to the Health Care sector, which has an average price to earnings (P/E) ratio of 30.21 and an average price to book (P/B) ratio of 4.08. In contrast, Eli Lilly and Company has a trailing 12 month P/E ratio of 137.3 and a P/B ratio of 60.52.

P/E rations can be placed into context by dividing them by the firm's expected 5-year EPS growth rate, which gives us its Price to Earnings Growth (PEG) ratio. Eli Lilly and Company's PEG ratio is 1.14, which tells us the company is fairly valued in terms of growth. PEG ratios under 1 are considered an indicator of undervalued growth, but we need to keep in mind that many successful companies with excellent share performance have maintained much higher PEG ratios.

As always, a quantitative approach to a stock should be supplemented with a look at qualitative factors, such as the competence of its management team, quality of its corporate culture, and the wide variety of social and economic factors that can impact the success of its product.

Strong Revenue Growth With Increasing Reinvestment in the Business:

2018 2019 2020 2021 2022 2023
Revenue (MM) $21,493 $22,320 $24,540 $28,318 $28,541 $32,072
Revenue Growth n/a 3.84% 9.95% 15.4% 0.79% 12.37%
Operating Margins 17% 24% 28% 22% 24% 19%
Net Margins 15% 37% 25% 20% 22% 16%
Net Income (MM) $3,232 $8,318 $6,194 $5,582 $6,245 $4,988
Net Interest Expense (MM) $242 $401 $360 $340 $332 $432
Depreciation & Amort. (MM) $1,609 $1,233 $1,324 $1,548 $1,522 $1,515
Earnings Per Share $3.13 $0.89 $6.79 $6.12 $6.9 $5.52
EPS Growth n/a -71.57% 662.92% -9.87% 12.75% -20.0%
Diluted Shares (MM) 1,034 9,357 913 912 905 900
Free Cash Flow (MM) $4,314 $3,803 $5,112 $5,951 $5,230 $2,836
Capital Expenditures (MM) $1,211 $1,034 $1,388 $1,310 $1,854 $2,878
Current Ratio 1.73 1.16 1.4 1.23 1.05 1.05
Total Debt (MM) $12,742 $15,138 $16,357 $18,280 $16,316 $2,245
Net Debt / EBITDA 1.02 1.97 1.48 1.88 1.71 -0.02

Eli Lilly and Company has rapidly growing revenues and increasing reinvestment in the business and strong operating margins with a stable trend. Additionally, the company's financial statements display positive EPS growth and healthy leverage levels. However, the firm has positive cash flows. Finally, we note that Eli Lilly and Company has just enough current assets to cover current liabilities, as shown by its current ratio of 1.05.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.