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Eli Lilly’s Latest Developments and Valuation

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Part 10
Eli Lilly’s Latest Developments and Valuation PART 10 OF 10

Changes in Eli Lilly’s Valuation

Eli Lilly’s valuation

Eli Lilly’s (LLY) human pharmaceutical business reported growth in 2Q17, while its animal health business reported a fall in revenues.

Changes in Eli Lilly’s Valuation

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The above chart shows revenues and EPS (earnings per share) for Eli Lilly over the last few quarters and estimates for 3Q17. Wall Street analysts are estimating revenues of $5.5 billion for 3Q17, a 6.1% rise compared to $5.2 billion for 3Q16. Analysts also estimate EPS of $1.03 for 3Q17 compared to $0.88 in 3Q16. Let’s look now at Eli Lilly’s valuation multiples.

Forward PE

PE (price-to-earnings) multiples represent what one share can buy for an equity investor. On September 28, 2017, the company was trading at a forward PE multiple of ~18.7x compared to the industry average of ~16.6x. Competitors Bristol-Myers Squibb (BMY), Allergan (AGN), and Merck & Co. (MRK) have forward PE multiples of 20.0x, 12.2x, and 15.7x, respectively.

Forward EV-to-EBITDA multiples

On a capital structure neutral and excess cash-adjusted basis, Lilly currently trades at an EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of ~13.8x, which is higher than the industry average of ~12.2x. Competitors Bristol-Myers Squibb (BMY), Allergan (AGN), and Merck & Co. (MRK) have forward EV-to-EBITDA multiples of 16.7x, 12.1x, and 11.8x, respectively.

Analyst recommendations

Eli Lilly stock has risen ~4.6% over the last 12 months and ~15.1% year-to-date. Analysts estimate that the stock has the potential to return ~6.6% over the next 12 months. Analysts’ recommendations show a 12-month target price of $90.24 per share compared to the last price of $84.65 per share on September 27, 2017.

There are 22 analysts tracking Eli Lilly stock. Of those, 14 analysts have recommended a “buy,” seven have recommended a “hold,” and one has recommended a “sell.” The current recommendation for Eli Lilly stock is 2.23, which shows a moderate “buy” for long-term investors.

The PowerShares Dynamic Pharmaceuticals ETF (PJP) holds 2.7% of its total assets in Eli Lilly (LLY).

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