LLY Stock Analysis: A Mixed Bag of Opportunities and Risks
🔴 Recommendation: Eli Lilly (LLY) presents a complex financial picture, showcasing both promising growth potential and cautionary signals that investors should consider.
📈 Key Highlights:
Profitability: Strong net income of $2.97 billion, reflecting exceptional operational efficiency with an operating margin of 100.00%.
Growth: Impressive year-over-year revenue growth of 28.91% and earnings growth of 68.20%, indicating robust future earnings potential.
Institutional Support: High institutional ownership at 83.53%, suggesting significant confidence from large investors.
⚠️ Caution Flags:
High Debt: Average net debt of $21.15 billion and a debt-to-equity ratio of 73.26 raise concerns about financial risk.
Overvaluation: Forward P/E ratio of 40.16 and price-to-sales ratio of 21.37 indicate potential overvaluation, suggesting the stock may be priced too high relative to its earnings.
As we delve deeper into the analysis, we will explore the price trends, indicators, financial health, valuation metrics, and more to provide a comprehensive view of LLY’s current standing and future outlook. Let’s dive into the details as we break down the various aspects influencing Eli Lilly’s stock performance 👇
LLY Price Analysis
| Positive Momentum Signals | Negative Momentum Signals | Hold Momentum Signals |
|---|---|---|
|
|
| Positive Trend Signals | Negative Trend Signals | Hold Trend Signals |
|---|---|---|
|
|
|
LLY stock presents a complex financial picture, characterized by both positive and negative indicators. On the positive side, the stock shows a neutral last price with several momentum indicators suggesting potential for recovery. The StochRSI is currently oversold, indicating that the stock may be undervalued in the short term. Additionally, the On-Balance Volume (OBV) is increasing, which often signals bullish sentiment among investors.
Trend indicators also lean towards the positive, with the price being above the 200-day EMA, suggesting a bullish trend that is strengthening. The Supertrend indicator confirms this bullish outlook, as the price remains above the Supertrend line. However, caution is warranted as the price is below the middle band of its Bollinger Bands, indicating a potential downtrend, albeit in oversold conditions. Furthermore, the price is below the 50-day EMA, which points to a bearish trend that is also strengthening.
In summary, while LLY stock has some encouraging signs, such as positive momentum and a bullish long-term trend, it also faces challenges with short-term bearish indicators. Investors should approach with caution, considering the mixed signals. A hold recommendation may be prudent until clearer trends emerge, particularly in light of the current oversold conditions and the potential for a rebound.
LLY Fundamental Analysis
LLY’s recent financial performance presents a compelling case for investors, marked by strong profitability and growth potential, despite some notable concerns regarding its financial structure.
The company reported a net income of $2.97 billion for the most recent period, showcasing its strong profitability. This is further supported by a year-over-year increase in net income, indicating a positive trend. LLY’s operating margin stands at an impressive 100.00%, reflecting exceptional operational efficiency and cost control. Additionally, a net profit margin of 26.25% highlights its robust ability to generate profits after accounting for all expenses.
However, there are significant concerns regarding LLY’s financial health. The average net debt is high at $21.15 billion, necessitating careful monitoring of the company’s financial flexibility. The debt-to-equity ratio of 73.26 raises alarms about financial risk, indicating substantial leverage. Furthermore, a current ratio of 0.31 suggests potential liquidity risks, as the company may face challenges in meeting its short-term obligations.
In terms of valuation, LLY exhibits signs of potential overvaluation. The forward P/E ratio of 40.16 and a price-to-sales ratio of 21.37 both indicate that the stock may be priced too high relative to its earnings and sales, respectively.
On the growth and profitability front, LLY demonstrates strong potential with a revenue of $11.30 billion and a remarkable year-over-year revenue growth of 28.91%. The company’s earnings growth of 68.20% is particularly impressive, suggesting robust future earnings potential. However, a negative free cash flow of -$675.32 million could limit its financial flexibility and growth opportunities.
Shareholder returns are a positive aspect of LLY’s strategy, with stock repurchases amounting to $1 billion, indicating a commitment to returning value to shareholders and potentially boosting earnings per share. The average ordinary shares outstanding at 919,757,400 suggests stability in share count, although fluctuations could impact stock price.
Analyzing the income statement reveals strong revenue growth of 36.00%, alongside an operating margin of 39.09%, which, while efficient, is lower than the overall operating margin. The profit margins at 18.86% reflect the company’s ability to generate profits after expenses, albeit lower than net profit margins.
On the balance sheet, the average total debt of $23.86 billion warrants further analysis to understand its composition and terms. A cash to total assets ratio of 0.04 indicates limited financial flexibility and vulnerability to economic shocks. The average tangible book value of $325.72 million suggests a reasonable net worth after liabilities, but further trend analysis is recommended.
In terms of cash flow, LLY’s average capital expenditures of $3.60 billion indicate investment in growth and expansion, which is a positive sign. Additionally, positive net cash from financing activities of $3.04 billion shows that the company is effectively raising capital.
Overall, despite concerns regarding high debt levels and liquidity risks, LLY’s strong revenue growth, profitability, and operational efficiency suggest a favorable outlook. While the stock may be overvalued based on current metrics, the growth potential and shareholder returns through buybacks present a compelling case for a strong buy recommendation. Investors should weigh these factors carefully when considering an investment in LLY.
Financial Health
🟢 Net Income for the most recent period was $2.97 billion, indicating strong profitability.
🟢 Year-over-year net income increased, which is a positive trend.
🟢 Operating Margin of 100.00% suggests exceptional operational efficiency and cost control.
🟢 Net Profit Margin of 26.25% reflects a strong ability to generate profits after all expenses.
🔴 Average Net Debt is high at $21.15 billion, which requires careful monitoring regarding financial flexibility.
🔴 Debt-to-Equity Ratio of 73.26 raises concerns about financial risk, indicating significant leverage.
🟡 Current Ratio of 0.31 suggests potential liquidity risk, as the company may struggle to meet short-term obligations.
Valuation
🔴 Forward P/E ratio of 40.16 indicates potential overvaluation, suggesting that the stock may be priced too high relative to its earnings.
🔴 Price-to-Sales ratio of 21.37 also suggests potential overvaluation, as it is significantly above the typical range.
Growth and Profitability
🟢 Revenue for the most recent period was $11.30 billion, with a year-over-year revenue growth of 28.91%, indicating strong growth potential.
🟢 Earnings growth of 68.20% is impressive, suggesting robust future earnings potential.
🔴 Free Cash Flow is negative at -$675.32 million, which could limit financial flexibility and growth opportunities.
Shareholder Information
🟢 Stock repurchases of $1 billion indicate a commitment to returning value to shareholders and may boost earnings per share.
🟡 Average Ordinary Shares Outstanding at 919,757,400 suggests stability in share count, but fluctuations could impact stock price.
Income Statement
🟢 Strong revenue growth of 36.00% indicates positive momentum in sales.
🟢 Operating Margin of 39.09% suggests efficient operations, although it is lower than the overall operating margin.
🟢 Profit Margins at 18.86% reflect the company’s ability to generate profits after expenses, although they are lower than net profit margins.
Balance Sheet
🔴 Average Total Debt of $23.86 billion requires further analysis to understand its composition and terms.
🔴 Cash to Total Assets Ratio of 0.04 indicates limited financial flexibility and vulnerability to economic shocks.
🟡 Average Tangible Book Value of $325.72 million suggests a reasonable net worth after liabilities, but further trend analysis is recommended.
Cashflow
🟢 Average Capital Expenditures of $3.60 billion suggest investment in growth and expansion, which is a positive sign.
🟢 Positive net cash from financing activities of $3.04 billion indicates the company is raising capital effectively.
Overall, despite some concerns regarding high debt levels and liquidity risks, the strong revenue growth, profitability, and operational efficiency suggest a favorable outlook for LLY. The stock may be overvalued based on current metrics, but the growth potential and shareholder returns through buybacks present a compelling case for a strong buy recommendation.
LLY News Analysis
Eli Lilly (LLY) is experiencing a mix of positive and negative news that could influence investor sentiment.
Summary of LLY news indicates a blend of developments that may affect the stock’s performance. The approval of a new treatment and significant investment in manufacturing are strong positives, while the sale of LLY stock by a major hedge fund raises concerns. Investors should weigh these factors carefully.
🟢 Eli Lilly has received US FDA approval for its treatment for atopic dermatitis, which could enhance its product portfolio and revenue potential.
🟢 The approval of EBGLYSS™ (lebrikizumab-lbkz) for adults and children with moderate-to-severe atopic dermatitis is a significant milestone for the company.
🟢 Eli Lilly is investing $1.8 billion to expand its manufacturing facilities, indicating confidence in future growth and demand for its products.
🔴 However, the world’s biggest hedge fund has sold its shares in Eli Lilly, which may signal a lack of confidence from institutional investors.
🔴 The mixed sentiment from analysts and the market reaction to the hedge fund’s decision could lead to volatility in LLY’s stock price.
🟢 Articles highlighting LLY as a strong dividend stock suggest that it remains an attractive option for income-focused investors.
LLY Holders Analysis
The financial health of LLY shows a mixed outlook, with strong institutional backing but low insider ownership raising some concerns.
🟢 LLY has a high institutional ownership at **83.53%**, indicating significant interest from large investors, which often correlates with stability and confidence in the company’s future. This level of institutional investment suggests that many large investors believe in the company’s growth potential.
🔴 However, the **0.15% insider ownership** is very low, which might indicate a lack of confidence from company management or a high degree of external control. This could be a red flag for potential investors, as it suggests that insiders may not have a significant stake in the company’s success.
🟡 The number of institutional holders is substantial at **4510**, indicating widespread interest and diversification among institutional investors. This can help mitigate volatility, but it also means that if these investors decide to sell, it could lead to increased price fluctuations.
🟢 Recent insider transactions show a mix of sales and minimal purchases, with a notable amount of selling by insiders. While this could indicate a lack of confidence, it is essential to consider that some sales may be part of pre-planned financial strategies rather than a direct reflection of the company’s future prospects.
🔴 The recent decline in insider purchases compared to sales could be a concern, as it may suggest that insiders are not optimistic about the stock’s short-term performance.
LLY Analyst Ratings
The analyst ratings for LLY (Eli Lilly and Company) are overwhelmingly positive, with a significant number of analysts recommending either a buy or strong buy. In the last month, there have been 7 strong buy ratings and 16 buy ratings, indicating a strong bullish sentiment among analysts. The absence of sell or strong sell ratings further reinforces this positive outlook. 🟢
The recent upgrades from firms such as JP Morgan, Cantor Fitzgerald, and Morgan Stanley, all maintaining an Overweight rating, suggest confidence in the company’s growth potential. Additionally, the overall trend shows a consistent increase in positive ratings over the past few months, with only one sell rating noted in the last three months.
Given the strong analyst support and the positive sentiment surrounding LLY, it is likely that the stock will perform well in the next month. The high confidence level indicates a strong belief in this forecast, with potential price targets suggesting an increase of approximately 5-10% based on current market conditions.
Overall, the outlook for LLY is very promising, and investors may consider taking advantage of this bullish sentiment.
LLY Economic Analysis
Based on the US economic and market data:
🟢 The **unemployment rate** has increased slightly to **4.3%**, but this is still relatively low, indicating a stable labor market that supports consumer spending.
🟢 **Retail sales** have shown an increase to **627,510**, suggesting strong consumer demand, which is beneficial for Eli Lilly’s pharmaceutical sales.
🟢 The **GDP growth** has remained robust at **5737.189**, indicating a healthy economy that typically supports corporate earnings growth.
🟢 Eli Lilly’s recent performance has been strong, with a **trailing PE ratio** of **113.62**, indicating that investors are willing to pay a premium for its growth potential.
🟢 The company’s **earnings growth** rate of **68.2%** and **revenue growth** of **36%** are impressive, suggesting strong operational performance.
🔴 However, the **CPI** remains high at **314.540**, which could lead to inflationary pressures and potential interest rate hikes, impacting growth stocks negatively.
🟢 Despite this, Eli Lilly’s **dividend yield** of **0.56%** and a **dividend rate** of **5.2** provide a cushion for investors, making it an attractive option in the current market environment.
Overall, the combination of strong economic indicators and Eli Lilly’s solid fundamentals supports a **buy** recommendation for the next month, with a target price potentially reaching **1000.89**, reflecting a favorable outlook.
Disclaimer
Investors may consider the AI predictions and news summaries as one factor in their investment decisions alongside their own research and risk tolerance.
