Eli Lilly and Company (NYSE: LLY) has grabbed headlines in early 2026 after reporting exceptionally strong Q4 2025 earnings, marking a milestone in growth and reinforcing its status as a high-growth, innovation-driven healthcare leader. The stock is up 66% since my recommendation in August 2025. The results not only smashed market expectations but also shed light on the company’s robust pipeline, expanding global presence, and strategic positioning in major therapeutic markets such as diabetes, obesity, immunology, and oncology. In this article we will dive into Eli Lilly recent earnings, stock performance & valuation, growth potential, and the risks investor should consider.
About Eli Lilly
Founded in 1876 by Colonel Eli
Lilly, a pharmaceutical chemist and Civil War veteran, Eli Lilly and Company
has evolved from a small Midwestern drug manufacturer into a global
pharmaceutical leader headquartered in Indianapolis, Indiana. With nearly 150 years
of innovation, Lilly has pioneered treatments ranging from early insulin
therapies to advanced biologics and metabolic drugs. Today, the company
develops and markets prescription medicines across diabetes, obesity, oncology,
immunology, and neuroscience, serving patients in over 125 countries worldwide.
Eli Lilly Financial
Performance
Eli Lilly delivered outstanding
financial performance in Q4 2025, highlighted by strong revenue, earnings, and
profitability growth. Quarterly revenue reached $19.29 billion, up 42.56% from
$13.53 billion in Q4 2024, while EPS increased 51.36% to $7.39 from $4.88 a
year earlier. On a trailing twelve-month basis, revenue rose 44.7% to $65.18
billion from $45.04 billion, and EPS surged 96% to $22.95 from $11.71. The
company maintained exceptional profitability with a Gross profit margin of
83.04% and a Net profit margin of 31.67%, alongside a Return on assets of
17.96% and an impressive Return on equity of 108.67%, supported by a
debt-to-equity ratio of 1.79 which is quite high.
Over the past five years, Eli
Lilly has grown its revenue at a 23.2% CAGR and net income at 38.6%. Eli Lilly
has proven to be a fast grower over the past five years and is still projected
to achieve high growth in 2026.
Eli Lilly Fiscal 2026
Financial Forecast
Looking ahead, analysts forecast
2026 revenue of $79.54 billion, representing 22.04% growth from 2025 revenue of
$65.18 billion, and non-GAAP EPS of $34.12, a 40.93% increase from $24.21 in
2025. Wall Street maintains a Buy rating on the stock with an average price
target of $1,191.19, implying 12.57% upside, while the highest target of $1,500
suggests potential upside of 41.77% from current levels.
LLY Stock Price Performance
and Valuation
At the time this video was created Eli Lilly’s stock was trading at $1,058.18 per share. Eli Lilly has delivered strong stock performance, rising 21.58% over the past year, clearly outperforming the S&P 500’s 13.95% gain during the same period. Over the last five years, the stock is up an impressive 424.4%, far exceeding the S&P 500’s 78.3% increase, highlighting Lilly’s long-term value creation for shareholders.
From a valuation perspective, Eli Lilly trades at reasonable
valuation. The stock offers a modest dividend yield of 0.65%, adding additional
return to the stock. Eli Lilly trades at a Price to sales P/S TTM ratio of 14.6
and a forward P/S of 11.91. While its non-GAAP Price to earnings P/E TTM of
43.71 and forward non-GAAP P/E of 30.99 reflect high growth expectations.
Based on Fiscal.ai data, if we
look at valuations over the past five years, the forward P/S is slightly above
average, while the forward P/E is below average. This means that despite the
stock’s exceptional price performance in the past, it still trades at a fair
valuation. Although these multiples appear elevated compared to the broader
market, they are supported by Lilly’s exceptional revenue and earnings growth,
industry-leading margins, and strong forward outlook, making the stock
attractive for the long term as long as the company continues to lead the
obesity drug market.
Eli Lilly Growth Potential
Eli Lilly growth potential
remains solid, driven by several factors.
- Dominant GLP‑1 Franchise in a Rapidly
Expanding Global Obesity and Diabetes Market
Full‑year 2025 results confirm that tirzepatide (Mounjaro for diabetes, Zepbound for obesity) is now Lilly’s main growth engine, with GLP‑1 drugs driving most of the 45% annual revenue increase. External estimates suggest 2025 sales of roughly $23 billion for Mounjaro and $13.5 billion for Zepbound, underscoring the scale of demand for incretin‑based therapies. Management highlights gaining share in injectable obesity and diabetes for five consecutive quarters, with Lilly products approaching about 60% of prescriptions in that category, outpacing Novo Nordisk’s GLP‑1 portfolio.
The company is still rolling out tirzepatide globally, including launches in major markets such as China, Brazil, and India, and expects expanded U.S. reimbursement, including Medicare obesity coverage around mid‑2026, further enlarging the addressable market. - Capacity Expansion, Margins
and Financial Firepower to Sustain Growth
Lilly’s Q4 and full‑year 2025 results show both strong profitability and heavy reinvestment. Non‑GAAP gross margin is above 83% of revenue, reflecting high‑value biologics and scale efficiencies, while operating income more than doubled year over year to over $26 billion in 2025. Management is aggressively expanding manufacturing, with new plants announced in Virginia and Texas and an expansion of Puerto Rico to meet surging incretin demand and support future launches.
R&D spend grew more than 20% in 2025 but still left ample free cash flow to fund capacity, business development and a growing dividend. The strong balance sheet and cash generation give Lilly flexibility to weather pricing pressure, finance large Phase 3 programs, pursue bolt‑on acquisitions and continue shareholder returns, reinforcing the durability of its growth profile. - Pipeline Depth in Metabolic Disease:
Orforglipron, Retatrutide and New Indications
Q4 2025 commentary and prior quarters show Lilly building a second wave of metabolic products beyond tirzepatide. Orforglipron, an oral GLP‑1 agent for obesity and diabetes, delivered positive Phase 3 results across four trials in 2025, with regulatory submissions for obesity already filed in the U.S. and more than 40 countries, and a planned launch as early as Q2 2026. This oral option could significantly broaden access for patients unwilling or unable to use injectables, and offers lifecycle extension in obesity.
Retatrutide, a next‑generation triple agonist (GIP/GLP‑1/glucagon), is in Phase 3 programs targeting obesity plus comorbid conditions like knee osteoarthritis, obstructive sleep apnea, and MASLD (metabolic dysfunction‑associated steatotic liver disease). Additional tirzepatide trials in asthma, inflammatory diseases and IBD further diversify future revenue streams within the same metabolic platform.
Risks to Consider
While Eli Lilly growth prospect
remains strong, we should be mindful of potential risks.
- Hyper Concentration in GLP‑1 Obesity/Diabetes
Lilly’s growth and margins are increasingly driven by its GLP-1 franchise Mounjaro for diabetes and Zepbound for obesity making any disruption in efficacy, safety, manufacturing, or reimbursement a disproportionate blow to the entire investment case. The company itself highlights this heavy dependence on key products and product classes as a major business risk in its formal risk-factor disclosures, underscoring the vulnerability of its current strategy to targeted setbacks. - Competition and Innovation Risk
The anti‑obesity and diabetes market is a tight race, especially versus Novo Nordisk and a wave of oral GLP‑1 competitors that could erode Lilly’s share or pricing power over time. Lilly flags pharmaceutical R&D as costly and uncertain, warning that failure to bring enough successful new products to market (or to offset loss of exclusivity) is a core strategic risk. - Regulatory, Pricing, and Political
Pushback
High-cost obesity and diabetes drugs are increasingly drawing attention from regulators, payers, and policymakers focused on controlling healthcare budgets, which could trigger tighter coverage restrictions, aggressive price negotiations, or broader cost-control measures. Lilly explicitly cites these legal, regulatory, and macro-political risks such as pricing controls, label changes, and evolving treatment standards as factors that could significantly reduce sales or profitability of its key therapies.
Conclusion
Eli Lilly stands out as a rare combination of exceptional growth and durable long-term value within the pharmaceutical sector. Its strong financial performance, market-leading products, expanding pipeline, and consistent stock outperformance highlight a company executing at a very high level. While valuation remains at a premium, it is justified by rapid earnings growth, strong margins, and favorable industry trends. For long-term investors seeking exposure to innovative healthcare leaders, Eli Lilly remains a compelling and well-supported investment choice.
I am offering a stock investing service at an affordable price to help you navigate the U.S. stock market.
Comments
Post a Comment