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.
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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.
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.
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.