LLY Leaps 5.0% In One Day, Things To Be Wary Of When Buying The Stock

We believe there is not much to fear in LLY stock given its overall Very Strong operating performance and financial condition. Hence, despite its Very High valuation, the stock appears Attractive but Volatile. Here is our multi-factor assessment.

But no matter how attractive, investing in a single stock carries high risk. Trefis High Quality Portfolio and is designed to reduce stock-specific risk while giving upside exposure

Let’s get into details of each of the assessed factors but before that, for quick background: With $685 Bil in market cap, Eli Lilly provides pharmaceuticals worldwide, specializing in treatments for cancers, rheumatoid arthritis, psoriasis, and related autoimmune diseases.

[1] Valuation Looks Very High

This table highlights how LLY is valued vs broader market. For more details see: LLY Valuation Ratios

[2] Growth Is Very Strong

• Eli Lilly has seen its top line grow at an average rate of 23.4% over the last 3 years
• Its revenues have grown 37% from $39 Bil to $53 Bil in the last 12 months
• Also, its quarterly revenues grew 37.6% to $16 Bil in the most recent quarter from $11 Bil a year ago.

This table highlights how LLY is growing vs broader market. For more details see: LLY Revenue Comparison

[3] Profitability Appears Very Strong

• LLY last 12 month operating income was $23 Bil representing operating margin of 43.0%
• With cash flow margin of 20.5%, it generated nearly $11 Bil in operating cash flow over this period
• For the same period, LLY generated nearly $14 Bil in net income, suggesting net margin of about 25.9%

This table highlights how LLY profitability vs broader market. For more details see: LLY Operating Income Comparison

[4] Financial Stability Looks Strong

• LLY Debt was $40 Bil at the end of the most recent quarter, while its current Market Cap is $685 Bil. This implies Debt-to-Equity Ratio of 5.9%
• LLY Cash (including cash equivalents) makes up $3.5 Bil of $101 Bil in total Assets. This yields a Cash-to-Assets Ratio of 3.5%

[4] Downturn Resilience Is Strong

LLY has been more resilient than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• LLY stock fell 18.7% from a high of $272.71 on 17 August 2021 to $221.60 on 28 September 2021 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 15 December 2021
• Since then, the stock increased to a high of $960.02 on 2 September 2024 , and currently trades at $763.00

 
2020 Covid Pandemic

• LLY stock fell 22.9% from a high of $169.13 on 8 July 2020 to $130.46 on 30 October 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 16 December 2020

 
2008 Global Financial Crisis

• LLY stock fell 54.6% from a high of $60.56 on 20 April 2007 to $27.47 on 5 March 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 21 April 2014

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