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Understanding Eli Lilly’s Valuation This November


Dec. 1 2017, Updated 9:01 a.m. ET

Eli Lilly’s valuation

Eli Lilly (LLY) is a US pharmaceutical company headquartered in Indianapolis, Indiana, and makes both human pharmaceuticals and animal health products.

In 3Q17, Eli Lilly surpassed the analysts’ estimates for EPS (earnings per share) and revenues, reporting EPS of $1.05 on revenues of ~$5.7 billion, compared with the estimate of $1.03 per share on revenues of ~$5.5 billion.

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Forward PE ratio

PE (price-to-earnings) multiples represent what one share of a stock can buy for an equity investor. On November 24, 2017, LLY was trading at a forward PE multiple of ~18.1x, compared with the industry average of ~14.7x.

By comparison, Bristol-Myers Squibb (BMY), Merck (MRK), and Pfizer (PFE) have forward PE multiples of 18.7x, 13.4x, and 12.9x, respectively.

Forward EV-to-EBITDA

On a capital structure neutral and excess cash-adjusted basis, Lilly’s forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) is ~13.6x—higher than the industry average of ~12.3x as of November 24, 2017. By comparison, Bristol-Myers Squibb (BMY), Merck (MRK), and Pfizer (PFE) have forward EV-to-EBITDA multiples of 15.7x, 10.2x, and 10.5x, respectively.

Notably, the VanEck Vectors Morningstar Wide Moat ETF (MOAT) has 26.4% of its total holdings in healthcare companies. MOAT has 2.5% in Eli Lilly(LLY), 2.6% in Pfizer (PFE), 2.6% in Bristol-Myers Squibb (BMY), and 2.7% in Biogen (BIIB).


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