Is Lilly Getting Silly?

By Staff of Bespoke Investment Group

Financial Research, Money Management • Jan 18, 2024 at 4:50 PM EST

An old-school drug company, Eli Lilly, has worked its way into the "top 10 list" of the largest US companies.

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Somewhat lost in the mix of the "Magnificent 7" mega-cap Tech stocks is the fact that an old-school drug company, Eli Lilly (LLY), has worked its way into the "top 10 list" of the largest US companies. As shown below, LLY's market cap currently stands at $600 billion, ranking it as the 9th largest S&P 500 stock behind Tesla (TSLA) and ahead of Visa (V).

Eli Lilly's (LLY) breathtaking run has been driven primarily by its type 2 diabetes drug, Mounjaro, which also recently received FDA approval to be sold as a weight loss treatment. Investors and speculators clearly have high expectations. How else can one explain the parabolic move higher in LLY's price-to-sales ratio, which is now at 18x? Below is a comparison of Lilly's P/S ratio versus Pfizer's (PFE) since the early 1990s. Up until recently when LLY got into the weight-loss game while Pfizer was more focused on COVID jabs, the two companies traded at very similar valuations. Now Pfizer has a price-to-sales ratio of just 2x versus LLY at 18x.

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