• If you are wondering whether Eli Lilly stock still offers fair value after its strong run, this article walks through what the current price might imply about future expectations.
• At a last close of US$1,117.26, Eli Lilly has returned 0.5% over the past week, 4.9% over the past month, 3.4% year to date and 42.0% over the past year, with a very large 3 year gain of 148.8% and 5 year gain of 410.3% helping to shape sentiment around the stock.
• Recent coverage around Eli Lilly has focused on its position in pharmaceuticals and the market attention that comes with a large, widely followed stock. This background helps explain why price moves can be closely watched by investors looking for signals on changing expectations or risk.
• Even with this history, Eli Lilly currently has a valuation score of 2 out of 6. The rest of this article walks through the standard valuation checks and then finishes with a broader way to think about what the stock might be worth in the context of risks and long term expectations.

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, or DCF, model estimates what Eli Lilly might be worth today by projecting future cash flows and discounting them back to a present value. It focuses on the cash the company could generate for shareholders rather than accounting earnings.

For Eli Lilly, the latest reported Free Cash Flow is about $8.6b over the last twelve months. Using a 2 Stage Free Cash Flow to Equity model, analysts and extrapolated estimates project Free Cash Flow reaching about $49.4b by 2030, with intermediate annual projections between 2026 and 2035 ranging from roughly $23.2b to $69.3b before discounting. Simply Wall St uses analyst forecasts for the earlier years, then extends the trend to build a full ten year path.

When these projected cash flows are discounted back, the model produces an estimated intrinsic value of about $1,497.84 per share. Compared with the recent share price of $1,117.26, this DCF output suggests Eli Lilly stock is trading at about a 25.4% discount to that estimate, which points to a meaningful gap between price and this particular valuation model.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Eli Lilly is undervalued by 25.4%. Track this in your watchlist or portfolio, or discover 44 more high quality undervalued stocks.

Approach 2: Eli Lilly Price vs Earnings

For a profitable company like Eli Lilly, the P/E ratio is a straightforward way to gauge how much you are paying for each dollar of earnings. It helps you compare what the market is currently willing to pay for Eli Lilly’s profits against other stocks or benchmarks.

What counts as a “normal” or “fair” P/E often reflects how the market views a company’s growth potential and risk profile. Higher expected earnings growth or lower perceived risk can support a higher P/E, while slower growth or higher risk usually points to a lower figure.

Eli Lilly currently trades on a P/E of 39.42x. This stands well above the Pharmaceuticals industry average of 15.36x and also above the broader peer group average of 23.67x. To give more context, Simply Wall St calculates a “Fair Ratio” of 35.53x, which is an internally derived estimate of what Eli Lilly’s P/E might be based on factors such as earnings growth, profit margins, industry, market cap and identified risks.

Because the Fair Ratio blends these company specific drivers, it can be more informative than a simple comparison with industry or peer averages. Against this Fair Ratio, Eli Lilly’s current P/E looks somewhat higher, which points toward the stock being priced above that proprietary estimate.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Eli Lilly Narrative

Earlier it was mentioned that there is an even better way to understand what Eli Lilly might be worth. Narratives let you attach a clear story about future revenue, earnings and margins to the numbers, connect that story to a Fair Value, and then compare it with the current price in a simple view on Simply Wall St’s Community page that updates automatically when fresh news or earnings arrive.

For Eli Lilly, one investor might build a more optimistic Narrative around obesity and diabetes opportunities and arrive at a Fair Value near US$1,500 per share, while another might focus on pricing pressure and safety questions and land closer to about US$900. Seeing both side by side can help you decide whether today’s market price fits closer to your own expectations or suggests you are paying above or below what you think the stock is worth.

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

These sit on opposite sides of the debate, so you can quickly see what needs to be true for Eli Lilly stock to look either undervalued or overvalued at around US$1,117 per share.

Fair value in this bullish Narrative: US$1,189.18 per share

Implied undervaluation versus the last close of US$1,117.26: about 6.0% below this fair value, using the author’s assumptions

Revenue growth assumption used in this Narrative: 20%

• The Narrative centres on Eli Lilly’s GLP 1 portfolio, particularly tirzepatide drugs Mounjaro and Zepbound, with analyst sales projections out to 2026 and an expectation that this franchise could outpace a key peer.
• It highlights patent protection on tirzepatide out towards 2036, relatively low GLP 1 penetration of an estimated 100m to 120m person target market in the US, and gradually improving insurance coverage as key supports for the thesis.
• Key risks flagged include high monthly pricing for GLP 1s, potential competition from new entrants, execution on new manufacturing facilities, possible side effect or legal headlines, and a currently high P/E that the author views as linked to the growth outlook.

Fair value in this bearish Narrative: US$899.73 per share

Implied overvaluation versus the last close of US$1,117.26: about 24.1% above this fair value, based on the more cautious analyst cohort

Revenue growth assumption used in this Narrative: 12.33%

• This Narrative focuses on pressure from potential US drug pricing reforms, global moves toward pricing parity, and value based reimbursement, all of which could limit pricing power for Eli Lilly’s obesity and diabetes products.
• It points to concentration in a few blockbuster drugs, rising R&D requirements, regulatory and safety scrutiny, and demographic trends that might leave the addressable market smaller than some projections.
• The author anchors on a Fair Value of about US$900 per share, framed as near the lower end of analyst targets, and suggests investors should closely test these assumptions against their own expectations for future margins, pricing and GLP 1 demand.

Taken together, these Narratives give you a clear range for what Eli Lilly might be worth based on different views about GLP 1 demand, pricing, competition and regulation. The key for any investor is deciding which story lines up more closely with personal expectations and risk tolerance, and then checking whether today’s price feels comfortable against that view when sizing any position.

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.