Eli Lilly and Company’s Valuation in March 2018

Eli Lilly and Company (LLY) is a leading pharmaceutical company with headquarters in Indianapolis, Indiana, and offices in 18 countries worldwide. 

Eli Lilly and Company reported EPS (earnings per share) of $1.14 on revenue of ~$6.2 billion in 4Q17. In 2017, the company reported EPS of $4.28 on revenue of ~$22.9 billion.

The chart above compares Eli Lilly and Company’s revenues and EPS since 1Q16. Let’s look at its valuation multiples.

A company’s PE (price-to-earnings ratio) represents what one share of its stock can buy for an equity investor. On March 26, 2018, Eli Lilly was trading at a forward PE of ~15.0x compared to the industry average of ~12.6x. Competitors Pfizer (PFE) and Merck & Co. (MRK) were trading at lower forward PEs of 11.6x and 12.6x, respectively, while Johnson & Johnson (JNJ) was trading at a higher forward PE of 15.3x.

On a capital-structure-neutral and excess-cash-adjusted basis, Eli Lilly is currently trading at a forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of ~11.9x, which is higher than the industry average of ~11.6x as of March 26, 2018. Competitors Pfizer, Johnson & Johnson, and Merck & Co. are trading at lower forward EV-to-EBITDA multiples of 9.7x, 11.5x, and 10.3x, respectively, compared to Eli Lilly.

The First Trust Capital Strength ETF (FTCS) holds 19.8% of its total investments in healthcare companies. FTCS holds 1.9% in Eli Lilly, 1.8% in Johnson & Johnson, and 2.0% in Pfizer.