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Is Eli Lilly and Company (LLY) Stock a Good Value Pick Now?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Eli Lilly and Company (LLY - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Lilly has a trailing twelve months PE ratio of 18.4, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 21.3. If we focus on the long-term PE trend, Lilly’s current PE level puts it below its midpoint over the past five years. Moreover, the current level is fairly below the highs for this stock, suggesting it might be a good entry point.
Further, the stock’s PE also compares favorably with the sector’s trailing twelve months PE ratio, which stands at 20.2. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Lilly has a forward PE ratio (price relative to this year’s earnings) of just 16.2, so it is fair to say that a slightly more value-oriented path may be ahead for Lilly stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Lilly has a P/S ratio of about 3.6. This is marginally higher than the S&P 500 average, which comes in at 3.4 right now. Nonetheless, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
Also, LLY is toward the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Lilly currently has a Zacks Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Lilly a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Lilly is just 1.5, a level that is lower than the industry average of 2.1. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate.
What About the Stock Overall?
Though Lilly might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of A and a Momentum score of B. This gives LLY a Zacks VGM score—or its overarching fundamental grade—of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mostly trending higher. The current quarter has seen no estimates go higher in the past sixty days compared to one lower, while the full year estimate has seen nine upward and one downward revisions in the same time period.
As a result, the current quarter consensus estimate has risen by 5.6% in the past two months, while the full year estimate has increased 3.6%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Even though Lilly has a better estimates trend, the stock has just a Zacks Rank #3 (Hold). That is why we are looking for in-line performance from the company in the near term.
Bottom Line
Lilly is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a robust industry rank (among the Top 18%) should boost investor confidence.
However over the past two years, the industry has underperformed the broader market, as you can see below:
Despite the poor past performance of the industry, a good industry rank signals that the stock is likely to benefit from favorable broader factors in the immediate future. Add to this the positive estimate revisions and robust value metrics, and we believe that we have a strong value contender in Lilly.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Is Eli Lilly and Company (LLY) Stock a Good Value Pick Now?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Eli Lilly and Company (LLY - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Lilly has a trailing twelve months PE ratio of 18.4, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 21.3. If we focus on the long-term PE trend, Lilly’s current PE level puts it below its midpoint over the past five years. Moreover, the current level is fairly below the highs for this stock, suggesting it might be a good entry point.
Further, the stock’s PE also compares favorably with the sector’s trailing twelve months PE ratio, which stands at 20.2. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Lilly has a forward PE ratio (price relative to this year’s earnings) of just 16.2, so it is fair to say that a slightly more value-oriented path may be ahead for Lilly stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Lilly has a P/S ratio of about 3.6. This is marginally higher than the S&P 500 average, which comes in at 3.4 right now. Nonetheless, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
Also, LLY is toward the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Lilly currently has a Zacks Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Lilly a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Lilly is just 1.5, a level that is lower than the industry average of 2.1. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate.
What About the Stock Overall?
Though Lilly might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of A and a Momentum score of B. This gives LLY a Zacks VGM score—or its overarching fundamental grade—of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mostly trending higher. The current quarter has seen no estimates go higher in the past sixty days compared to one lower, while the full year estimate has seen nine upward and one downward revisions in the same time period.
As a result, the current quarter consensus estimate has risen by 5.6% in the past two months, while the full year estimate has increased 3.6%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Eli Lilly and Company Price and Consensus
Eli Lilly and Company Price and Consensus | Eli Lilly and Company Quote
Even though Lilly has a better estimates trend, the stock has just a Zacks Rank #3 (Hold). That is why we are looking for in-line performance from the company in the near term.
Bottom Line
Lilly is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a robust industry rank (among the Top 18%) should boost investor confidence.
However over the past two years, the industry has underperformed the broader market, as you can see below:
Despite the poor past performance of the industry, a good industry rank signals that the stock is likely to benefit from favorable broader factors in the immediate future. Add to this the positive estimate revisions and robust value metrics, and we believe that we have a strong value contender in Lilly.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>