Is Eli Lilly’s Recent FDA Progress Making the Stock a Bargain in 2025?

Ever wondered if Eli Lilly's stock is offering genuine value, or if the price is running ahead of itself? Let’s dig into what’s happening beneath those eye-catching numbers. Shares have climbed an impressive 13.8% in just the last week, and are up 20.2% over the past year, showing that investors remain bullish, while possibly adjusting their risk and reward expectations. Recent headlines have amplified optimism about Eli Lilly’s drug pipeline, including FDA progress for obesity and diabetes treatments, which has strengthened positive sentiment. Meanwhile, investor buzz has grown as partnerships and innovation headlines fuel expectations for further growth. Right now, Eli Lilly earns a valuation score of 2 out of 6, so just a third of our core valuation checks point to the stock being undervalued. We’ll break down how this score is calculated across different valuation methods, while also hinting at a smarter, big-picture way to judge Eli Lilly’s value that you won’t want to miss by the end of this article.

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 (DCF) model estimates a company's true value by projecting its future cash flows and discounting them back to what they are worth today. This approach gives investors a way to judge whether a stock price is justified by its expected ability to generate cash over time.

For Eli Lilly, the DCF analysis uses current and projected Free Cash Flow (FCF) as its foundation. In the most recent period, Eli Lilly generated $6.2 Billion in free cash flow. Analyst estimates span out over the next several years, expecting significant growth. By 2029, FCF is forecast to reach $36.0 Billion. While analysts provide estimates for the next five years, further projections are extrapolated using historical trends.

Applying these forecasts, the model calculates the present value of all expected future cash flows and arrives at an intrinsic value of $1,226 per share. Compared to the company’s market price, this suggests that Eli Lilly's shares are trading at a 24.5% discount to their estimated fair value. The DCF model indicates that the stock is undervalued based on long-term cash flow prospects.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Eli Lilly is undervalued by 24.5%. Track this in your watchlist or portfolio, or discover 846 more undervalued stocks based on cash flows.LLY Discounted Cash Flow as at Nov 2025

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

Story Continues

Approach 2: Eli Lilly Price vs Earnings

For profitable companies like Eli Lilly, the Price-to-Earnings (PE) ratio is a widely used metric to evaluate valuation. The PE ratio indicates how much investors are willing to pay for each dollar of earnings. This metric is especially meaningful when a company has strong, consistent profits.

It is important to remember that a "normal" or "fair" PE ratio can vary depending on growth prospects and the level of risk investors are willing to accept. Companies expected to post faster earnings growth typically command higher PE ratios, while higher perceived risk usually means a lower ratio.

Eli Lilly currently trades at a PE of 45.0x. This is substantially higher than both the pharmaceutical industry average of 17.8x and the average of its selected peers at 14.7x. On the surface, this might suggest the stock is expensive.

However, Simply Wall St's "Fair Ratio" takes the analysis further by tailoring the appropriate multiple for Eli Lilly’s unique profile. The Fair Ratio model factors in not just industry norms, but also Eli Lilly’s earnings growth outlook, profit margins, market size, and company-specific risks.

For Eli Lilly, the Fair Ratio is calculated at 42.5x. This proprietary measure offers a more precise benchmark, reflecting all the factors that matter most to investors, unlike broader peer or industry comparisons that may overlook nuanced strengths or challenges.

Comparing Eli Lilly’s current PE ratio of 45.0x to its Fair Ratio of 42.5x shows the shares are valued almost perfectly in line with expectations when all factors are considered, with no meaningful overvaluation or undervaluation signal emerging.

Result: ABOUT RIGHTNYSE:LLY PE Ratio as at Nov 2025

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1408 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's introduce you to Narratives. A Narrative is simply your story for a company, a set of beliefs about its future prospects, drivers, and risks, which you connect directly to numbers like fair value, expected revenue growth, margins, and more.

On Simply Wall St’s Community page, Narratives make investing easier by helping you express your outlook for Eli Lilly in plain language and then linking that to an estimate of what the shares are really worth. Narratives guide you to think beyond headline prices, allowing you to compare your own fair value with the current market price and decide when to buy or sell, all supported by specific business catalysts and financial assumptions.

Because Narratives are updated automatically as new information, earnings, or news is published, your viewpoint stays relevant and actionable without manual tracking or spreadsheets.

For example, some investors currently see Eli Lilly’s long-term prospects and forecast a fair value near $1,190 per share, while others remain much more cautious, putting fair value as low as $650, based on different assumptions about revenue growth and industry competition.

For Eli Lilly, we’ll make it really easy for you with previews of two leading Eli Lilly Narratives:

🐂 Eli Lilly Bull Case

Fair Value: $1,189.18

Current price is 22.2% below this fair value

Revenue Growth Rate: 20%

The Tirzepatide franchise (Mounjaro/Zepbound) is driving rapid sales growth and is protected from generic competition until at least 2036. This supports long-term exclusivity. U.S. market protectionism and improving insurance coverage are expected to fuel further demand and pricing leverage. Production constraints are seen as a short-term obstacle. Main risks include high pricing potentially constraining broader access, new competitors and brands entering the market post-2027, and elevated P/E based on optimistic growth assumptions. 🐻 Eli Lilly Bear Case

Fair Value: $919.33

Current price is 0.7% above this fair value

Revenue Growth Rate: 16.3%

Strong growth in obesity and diabetes medicine is projected to continue, supported by global expansion and rising demand for specialty therapies. Exposure to regulatory, pricing, and reimbursement challenges as well as heavy reliance on a narrow blockbuster portfolio creates risks for revenue and margin stability. Analyst consensus price target incorporates lower revenue projections than the bull case, with potential downside if pricing pressures or competition intensify. This case assumes net margin improvement to nearly 39% by 2028.

Do you think there's more to the story for Eli Lilly? Head over to our Community to see what others are saying!NYSE:LLY Community Fair Values as at Nov 2025

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.

Companies discussed in this article include LLY.

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