Is It Too Late To Consider Eli Lilly After Its Massive Multi Year Share Price Surge

• Wondering if Eli Lilly is still worth buying after its massive run, or if the market has finally pushed the stock too far ahead of its fundamentals?
• Even after a recent dip of 6.1% over the last week, the shares are still up 9.1% over the past month, 29.8% year to date, 23.1% over the last year, and an eye catching 186.6% and 565.2% over the past 3 and 5 years respectively. This naturally raises questions about how much future growth is already priced in.
• Those moves have been driven largely by excitement around Eli Lilly's pipeline and commercial momentum in areas like obesity and diabetes, particularly its GLP 1 treatments and related metabolic offerings. At the same time, regulatory developments, competitive approvals, and ongoing debate about drug pricing have all contributed to shifting market expectations and short term volatility.
• Our valuation framework gives Eli Lilly a score of 2 out of 6, meaning it only screens as undervalued on a couple of our standard checks. In the sections that follow, we will look at what traditional valuation methods say about the stock, and then finish with a more holistic way of thinking about what it is really worth.

Eli Lilly scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Eli Lilly Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business is worth today by projecting its future cash flows and then discounting them back to the present using a required rate of return.

For Eli Lilly, the model starts with last twelve month free cash flow of about $6.2 billion and uses analyst forecasts for the next few years, then extends those trends further out. By 2029, Simply Wall St’s 2 Stage Free Cash Flow to Equity model projects free cash flow of roughly $37.6 billion, with additional extrapolated growth taking projected cash flows above $60 billion by 2035.

Discounting these projected cash flows back to today in US dollars yields an estimated intrinsic value of about $1,274 per share. Compared with the current share price, this suggests the stock is roughly 20.7% undervalued within this DCF framework.

On this analysis, investors are not just paying for hype; they appear to be getting a value cushion if the cash flow trajectory used in the model occurs.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Eli Lilly is undervalued by 20.7%. Track this in your watchlist or portfolio, or discover 906 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Eli Lilly.

Approach 2: Eli Lilly Price vs Earnings

For a profitable business like Eli Lilly, the price to earnings ratio is a useful yardstick because it directly links what investors pay today with the company’s current earnings power. In broad terms, faster, more reliable growth and lower risk justify a higher PE, while slower, more uncertain growth usually commands a lower multiple.

Eli Lilly currently trades on a PE of about 49.1x, well above both the broader Pharmaceuticals industry average of roughly 19.5x and a peer average of around 16.3x. On those simple comparisons, the stock looks expensive. However, Simply Wall St’s Fair Ratio framework estimates that, given Eli Lilly’s growth profile, margins, scale, industry positioning and risk characteristics, a more appropriate PE would be about 42.7x.

The Fair Ratio is more informative than a straight peer or industry comparison because it adjusts for company specific fundamentals and risk, rather than assuming one size fits all. In Eli Lilly’s case, even after allowing for its superior growth outlook and quality, the current 49.1x PE still sits noticeably above the 42.7x Fair Ratio, which points to a premium that looks stretched on earnings.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1442 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Eli Lilly Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of Eli Lilly’s story with concrete numbers like future revenue, earnings, margins and ultimately a fair value estimate.

A Narrative on Simply Wall St is your own structured story for a company, where you spell out what you think will drive the business, translate that into a financial forecast, and then see what share price those assumptions imply.

Because Narratives live inside the Community page on Simply Wall St, they are easy to create, compare and update, and they refresh dynamically as new information like earnings, news, or regulatory decisions flows through.

This makes them a practical decision making tool, helping you compare the Fair Value from your Narrative to the current market Price, so you can decide whether Eli Lilly looks like a buy, hold or sell to you.

For example, one investor might build a bullish Eli Lilly Narrative with a Fair Value near $1,189 per share based on strong GLP 1 growth and long patent protection, while another more cautious investor might anchor closer to $650, reflecting concerns about future pricing pressure and policy risk.

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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