This Healthcare Company Is Likely To Offer Better Returns Over Eli Lilly Stock

LLY: Eli Lilly and Company logo
Eli Lilly and Company

We believe that Becton Dickinson stock (NYSE: BDX) is currently a better pick than Eli Lilly stock (NYSE: LLY), given its better prospects. Although BDX stock is trading at a comparatively lower valuation of 3.6x trailing revenues, compared to 10.0x for LLY, this gap in valuation, to a large extent, makes sense, given Eli Lilly’s superior revenue growth, profitability, and lower financial risk, as discussed below.

Looking at stock returns, Eli Lilly, with an 11% rise this year, has fared better than Becton Dickinson stock, which is up 2%, and both have outperformed the broader S&P500 index, down 17% over this period. There is more to the comparison, and in the sections below, we discuss why we believe BDX stock will offer better returns than LLY stock in the next three years. We compare a slew of factors such as historical revenue growth, returns, and valuation multiple in an interactive dashboard analysis of Eli Lilly vs. Becton Dickinson: Which Stock Is A Better Bet? Parts of the analysis are summarized below.

1. Eli Lilly’s Revenue Growth Is Better

  • Both companies posted sales growth over the last twelve months. Still, Eli Lilly’s revenue growth of 8.8% is higher than 5.1% for Becton Dickinson.
  • Even if we look at a longer time frame, Eli Lilly has fared better, with its sales rising at an average annual rate of 9.7% to $28.3 billion in 2021, compared to $21.5 billion in 2018, while Becton Dickinson’s sales grew at an average rate of 8.5% to $20.2 billion in 2021, compared to around $16.0  billion in 2018.
  • Eli Lilly’s revenue growth has been driven by continued market share gains for drugs, such as Trulicity, Verzenio, Jardiance, and its Covid-19 antibodies. The company recently secured U.S. FDA approval for its diabetes drug – Tirzepatide – which is expected to garner over $5 billion in peak sales.
  • Eli Lilly has a robust product cycle, including Alzheimer’s treatment – Donanemab – one of the most anticipated drugs with peak sales pegged as high as $10 billion.
  • Becton Dickinson’s revenue growth over the recent past has been aided by its Covid-19 diagnostic tests and the increased demand for its medical delivery solutions and pharmaceuticals systems, primarily pre-filled devices. Earlier this year, the company completed the spin-off of its diabetes business, which is now listed as a separate entity – Embecta (NASDAQ: EMBC) – on the Nasdaq stock exchange.
  • Our Eli Lilly Revenue and Becton Dickinson Revenue dashboards provide more insight into the companies’ sales.
  • Looking forward, Becton Dickinson is expected to post better sales growth.
  • The table below summarizes our revenue expectation for both companies over the next three years and points to a CAGR of 2.1% for Eli Lilly, compared to a CAGR of 9.2% for Becton Dickinson.
  • Note that we have different methodologies for companies negatively impacted by Covid and those not impacted or positively impacted by Covid while forecasting future revenues. For companies negatively affected by Covid, we consider the quarterly revenue recovery trajectory to predict recovery to the pre-Covid revenue run rate. Beyond the recovery point, we apply the average annual growth observed three years before Covid to simulate a return to normal conditions. For companies registering positive revenue growth during Covid, we consider yearly average growth before Covid with a certain weight to growth during Covid and the last twelve months.
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2. Eli Lilly Is More Profitable, And It Offers Lower Risk

  • Eli Lilly’s operating margin of 24.5% over the last twelve-month period is better than 16.2% for Becton Dickinson.
  • This compares with 21.8% and 13.9% figures seen in 2019, before the pandemic, respectively.
  • Eli Lilly’s free cash flow margin of 24.4% is also better than 13.9% for Becton Dickinson.
  • Our Eli Lilly Operating Income and Becton Dickinson Operating Income dashboards have more details.
  • Looking at financial risk, Eli Lilly fares better. Its 6.1% debt as a percentage of equity is lower than 20.9% for Becton Dickinson, while its 5.8% cash as a percentage of assets is higher than 4.8% for the latter, implying that Eli Lilly has a better debt position and has more cash cushion.

3. The Net of It All

  • We see that Eli Lilly has demonstrated better revenue growth, is more profitable, and offers lower financial risk. On the other hand, Becton Dickinson is available at a comparatively lower valuation.
  • Now, looking at prospects, using P/S as a base, due to high fluctuations in P/E and P/EBIT, we believe Becton Dickinson is currently the better choice of the two.
  • The table below summarizes our revenue and return expectations for Eli Lilly and Becton Dickinson over the next three years and points to an expected return of -7% for Eli Lilly over this period vs. a 28% expected return for Becton Dickinson, implying that investors are better off buying BDX over LLY, based on Trefis Machine Learning analysis –Eli Lilly vs. Becton Dickinson – which also provides more details on how we arrive at these numbers.

While BDX stock may outperform LLY, it is helpful to see how Eli Lilly’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities, which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Teleflex vs. Amerco.

Despite higher inflation and the Fed raising interest rates, LLY stock has seen an 11% rise this year. But can it drop from here? See how low Eli Lilly stock can go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Sep 2022
MTD [1]
YTD [1]
Total [2]
LLY Return 2% 11% 317%
BDX Return 2% 2% 55%
S&P 500 Return -1% -17% 76%
Trefis Multi-Strategy Portfolio 1% -15% 236%

[1] Month-to-date and year-to-date as of 9/14/2022
[2] Cumulative total returns since the end of 2016

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