Leadership, Pricing Power, and a 30% Cheaper Tag on LLY
Eli Lilly (LLY) deserves your consideration. Why? Because you get monopoly-like high margins for a discounted price. Here is some data.
- Revenue Growth: 36.8% LTM and 23.4% last 3 year average.
- Recent Profitability: Nearly 20.5% operating cash flow margin and 43.0% operating margin LTM.
- Long-Term Profitability: About 17.8% operating cash flow margin and 35.6% operating margin last 3 year average.
- Available At Discount: At P/S multiple of 14.2, the stock is available at a 30% discount vs 1 year ago.
While revenue growth helps, this is not a growth perspective. Pricing power and high margins generate consistent, predictable profits and cash flows, which reduce risk and allow capital to be reinvested. Market tends to reward that.
As a quick background, Eli Lilly provides innovative pharmaceuticals globally, including treatments for cancer, rheumatoid arthritis, and autoimmune diseases such as psoriasis and ankylosing spondylitis.
| LLY | S&P Median | |
|---|---|---|
| Sector | Health Care | – |
| Industry | Pharmaceuticals | – |
| PS Ratio | 14.2 | 3.3 |
| PE Ratio | 55.0 | 23.9 |
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| LTM* Revenue Growth | 36.8% | 5.2% |
| 3Y Average Annual Revenue Growth | 23.4% | 5.3% |
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| LTM* Operating Margin | 43.0% | 18.6% |
| 3Y Average Operating Margin | 35.6% | 17.8% |
| LTM* Op Cash Flow Margin | 20.5% | 20.3% |
| 3Y Average Op Cash Flow Margin | 17.8% | 19.8% |
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| DE Ratio | 5.3% | 20.9% |
*LTM: Last Twelve Months
But do these numbers tell the full story? Read Buy or Sell LLY Stock to see if Eli Lilly still has an edge that holds up under the hood.
Single stock can be risky, but there is a huge value to a broader diversified approach we take with Trefis High Quality Portfolio. Let us ask you this: Over the last 5 years, which index do you think the Trefis High Quality Portfolio outperformed – the S&P 500, Nasdaq, or both? The answer might surprise you. See how our advisory framework helps stack the odds in your favor.
Stocks Like These Can Outperform. Here Is Data
Here is how we make the selection: We consider stocks > $10 Bil in market cap, and then filter out those with high CFO (cash flow from operations) margins or operating margins. We additionally consider only those stocks that have meaningfully declined in valuation over the past 1 year.
Below are statistics for stocks with this selection strategy applied since 12/31/2016.
- Average 12-month forward returns of nearly 19%
- 12-month win rate (percentage of picks returning positive) of about 72%
But Consider The Risk
That said, Lilly isn’t immune to big drops. It fell 51% during the Global Financial Crisis and 43% in the Dot-Com bubble. Even in more recent turbulence, like the 2018 correction, inflation shock, and Covid pandemic, it still saw declines between 18% and 22%. So, despite strong fundamentals, this stock can take a noticeable hit when markets turn sour.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. 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.