Should You Buy Or Sell Eli Lilly Stock?

January 16th, 2026 by Trefis Team

LLY

Eli Lilly

Eli Lilly’s recent 3.76% decline following the FDA’s delay of its oral weight-loss pill Orforglipron represents a tactical buying opportunity rather than a cause for concern. While the stock trades at a premium valuation, the company’s exceptional operational performance, robust financial health, and promising long-term prospects in the obesity treatment market justify maintaining or adding to positions for long-term investors.

Current Situation: The FDA’s postponement of Orforglipron’s decision date triggered a market overreaction, as evidenced by the sharp single-day decline. However, this administrative delay doesn’t fundamentally alter the drug’s clinical efficacy demonstrated in trials or diminish the substantial market opportunity in obesity treatment. For perspective, regulatory reviews often encounter timeline adjustments without reflecting negatively on eventual approval prospects.

But before we dive into the details on why we think LLY stock is a buy at the current levels, if you seek an upside with less volatility than holding an individual stock, consider the High Quality Portfolio. It has comfortably outperformed its benchmark—a combination of the S&P 500, Russell, and S&P MidCap indexes—and has achieved returns exceeding 105% since its inception. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics. Separately, see – Can Archer Aviation Stock Double From Here?

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Valuation: Expensive But Justified

Price-to-Sales ratio: 17.4x (vs. S&P 500 at 3.3x)
Price-to-Earnings ratio: 67.2x (vs. S&P 500 at 24.2x)
Market capitalization: $926 billion

Eli Lilly’s valuation multiples appear demanding on surface analysis, trading at roughly 5x the market’s P/S ratio and nearly 3x its P/E ratio. However, these premiums become more justifiable when examining the company’s operational excellence and growth trajectory.

Growth: Exceptional Momentum

Eli Lilly demonstrates best-in-class revenue expansion:

Three-year average revenue growth: 23.4% (vs. S&P 500 at 5.6%)
Trailing twelve-month growth: 36.8%, expanding from $39 billion to $53 billion
Most recent quarterly growth: 37.6% year-over-year, reaching $16 billion

This consistent acceleration indicates strong underlying demand for the company’s pharmaceutical portfolio, particularly its diabetes and obesity franchises. The growth rate significantly outpaces both the broader market and most pharmaceutical peers, suggesting successful product commercialization and market share gains.

Profitability: Industry-Leading Margins

The company exhibits exceptional profitability across all key metrics:

Operating margin: 43.0% ($23 billion operating income)
Operating cash flow margin: 20.5% ($11 billion OCF)
Net income margin: 25.9% ($14 billion net income)

These margins substantially exceed S&P 500 averages and reflect Eli Lilly’s pricing power, operational efficiency, and high-value product mix.

Financial Stability: Fortress Balance Sheet

Total debt: $40 billion
Debt-to-equity ratio: 4.3% (exceptionally low vs. S&P 500’s 19.9%)
Total assets: $101 billion
Cash position: $3.5 billion (3.5% of assets)

The minimal leverage provides substantial financial flexibility for R&D investments, business development, and weathering potential setbacks. While the cash-to-assets ratio of 3.5% appears modest relative to the benchmark, the overall balance sheet strength and cash generation capabilities mitigate liquidity concerns.

Resilience Through Market Cycles

Historical performance during crisis periods demonstrates defensive characteristics:

2022 Inflation Shock: Declined 18.7% versus S&P 500’s 25.4% drop; recovered by December 2021 and subsequently gained over 4x to reach $1,109.94 by November 2025.
2020 COVID Pandemic: Fell 22.9% compared to the market’s 33.9% decline; recovered within five months.
2008 Financial Crisis: Declined 54.6% versus the S&P 500’s 56.8% fall; demonstrated resilience relative to the severe market dislocation, though recovery took approximately seven years.

Look at – How Low Can Eli Lilly Stock Really Go? – for more details. This track record indicates that Eli Lilly typically outperforms during market stress and demonstrates solid recovery characteristics, making it suitable for risk-conscious portfolios.

The Bottom Line: Look Beyond Short-Term Noise

Strengths Supporting the Bull Case:

The obesity treatment market represents a multi-hundred-billion-dollar opportunity with structural growth drivers
Clinical trial data for Orforglipron remain unchanged and compelling
FDA delays are procedural and don’t signal efficacy or safety concerns
Existing product portfolio drives exceptional current performance
Analyst consensus price target of around $1,200 implies approximately 15% upside

Risk Considerations:

Premium valuation leaves a limited margin for disappointment
Regulatory uncertainty could extend beyond current expectations
Competitive pressures, especially from Novo Nordisk, in obesity treatments may intensify. Related – What’s Happening With Novo Nordisk Stock?
High expectations are embedded in the current stock price

For long-term investors, the current pullback presents an attractive entry point or position-building opportunity. The temporary regulatory delay doesn’t diminish the fundamental investment case. The combination of very strong operational performance, robust financial condition, and transformative market opportunities outweighs the temporary setback from the FDA delay, making this dip potentially advantageous for investors with appropriate time horizons.

That said, investing in a single stock without comprehensive analysis can be risky. Consider the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.

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