- Some investors may be wondering if Eli Lilly is still worth its current price, or if the recent run has already baked in too much optimism.
- The stock closed at US$878.24, with returns of a 3.5% decline over 7 days, a 16.5% decline over 30 days, an 18.7% decline year to date, a 7.1% gain over 1 year, a 156.0% gain over 3 years and a very large gain over 5 years.
- Recent headlines have focused on Eli Lilly's role in high profile drug categories, including weight management and other blockbuster treatments. These often shape how investors think about long term revenue potential. At the same time, market commentary has highlighted shifting expectations around drug pricing, competition and regulatory developments. All of these factors feed directly into how the stock is priced.
- Eli Lilly currently has a valuation score of 4 out of 6. The next sections will walk through what different valuation methods suggest about that score, before finishing with a more complete way to think about what the stock might be worth.
Find out why Eli Lilly's 7.1% return over the last year is lagging behind its peers.
Approach 1: Eli Lilly Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model estimates what a company could be worth by projecting future cash flows and discounting them back to today, so you can compare that value to the current share price.
For Eli Lilly, the model uses a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The latest twelve month Free Cash Flow is about $5.88b. Analyst estimates and subsequent extrapolations point to projected Free Cash Flow of $47.38b by 2030, with a series of annual projections from 2026 through 2035 supplied by analysts and extended using Simply Wall St assumptions.
When those projected cash flows are discounted back to today in this model, the estimated intrinsic value comes out at about $1,441.72 per share. Against a recent share price of $878.24, the DCF implies an intrinsic discount of roughly 39.1%, which indicates the stock is currently assessed as undervalued by this framework.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Eli Lilly is undervalued by 39.1%. Track this in your watchlist or portfolio, or discover 62 more high quality undervalued stocks.
Approach 2: Eli Lilly Price vs Earnings
For a profitable company, the P/E ratio is a useful shorthand because it links what you pay today to the earnings the business is already generating. It also reflects what the market is willing to pay for each dollar of earnings, which is where expectations and risk come in.
Higher growth expectations and lower perceived risk usually support a higher P/E ratio, while slower growth and higher risk tend to pull a “normal” or “fair” P/E lower. Eli Lilly currently trades on a P/E of 38.07x, compared with the Pharmaceuticals industry average of 16.66x and a peer group average of 18.65x.
Simply Wall St’s Fair Ratio for Eli Lilly is 41.90x, which is its proprietary estimate of what the P/E could be given factors like earnings growth, profit margins, market cap, industry and company specific risks. This Fair Ratio can be more tailored than a simple comparison with peers or the broad industry, because it adjusts for the company’s own fundamentals rather than assuming all drug makers deserve the same multiple.
With a current P/E of 38.07x versus a Fair Ratio of 41.90x, the preferred multiple comparison suggests Eli Lilly screens as undervalued on this metric.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Eli Lilly Narrative
Earlier it was mentioned that there is an even better way to understand valuation, so this is where Narratives come in, giving you a simple story behind the numbers by linking your own view on Eli Lilly’s future revenue, earnings and margins to a forecast and then to a Fair Value that you can compare with today’s price.
On Simply Wall St’s Community page, Narratives are an accessible tool used by millions of investors. You pick or adjust a scenario, see the implied Fair Value next to the current share price, and use that gap to help decide whether the stock looks expensive or cheap for your goals rather than relying only on headline ratios.
Because Narratives are updated automatically when new information such as earnings, trial results or pricing news is added, your chosen Eli Lilly view stays current. You can see how the implied Fair Value moves as inputs change instead of manually rebuilding a model each time.
Recent Eli Lilly Narratives on the platform illustrate how wide these views can be. More bullish community models point to Fair Values around US$1,500 per share, while more cautious ones are closer to US$650, giving you a clear, side-by-side sense of how different assumptions translate into very different valuations.
Do you think there's more to the story for Eli Lilly? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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