Eli Lilly trades at $1,175 per share and has stayed right on track with the overall market, gaining 15.4% over the last six months. At the same time, the S&P 500 has returned 11.6%.
Is now a good time to buy LLY? Find out in our full research report, it’s free.
Why Is LLY a Good Business?
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
A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, Eli Lilly’s 24.4% 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.
Looking at the trend in its profitability, Eli Lilly’s adjusted operating margin rose by 18.7 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 44.6%.
3. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Eli Lilly’s EPS grew at 31.4% compounded annual growth rate over the last five years, higher than its 24.4% 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 Eli Lilly ranks near the top of our list. At $1,175 per share (or 29.2× forward P/E), is now the right time to buy the stock? See for yourself in our in-depth research report, it’s free.
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