Eli Lilly (LLY) has surged back into the spotlight after the FDA approved Foundayo, a once daily oral GLP 1 pill for obesity that expands the company’s weight loss portfolio beyond injectables.

The FDA approval of Foundayo comes after an already active period for Eli Lilly, with recent acquisitions in neuroscience and new data across dermatology and psoriatic arthritis. Over the same time, the share price has seen a 30 day return of 7.16% and a 90 day return of 13.40%, alongside a one year total shareholder return of 19.44% and a very large five year total shareholder return. This suggests that long term momentum is still intact even as shorter term sentiment shifts around obesity competition and drug pricing headlines.

If weight loss and healthcare AI are on your radar, this is also a good moment to see what else is moving and scan 37 healthcare AI stocks

With Eli Lilly now worth about US$854.1b and trading at US$935.58, yet screened as having an intrinsic discount of roughly 35% and a 29% gap to analyst targets, are you looking at a real opportunity here, or at a market that is already pricing in years of growth?

Most Popular Narrative: 21.3% Undervalued

According to the most followed narrative, Eli Lilly's fair value of $1,189.18 sits well above the last close at $935.58, with the gap driven largely by expectations around its GLP 1 obesity and diabetes franchise.

Catalysts

• Mounjaro/Zepbound: Lilly’s tirzepatide franchise is the engine of growth. Mounjaro (for type 2 diabetes) and Zepbound (obesity) each grew rapidly in 2024. Analysts project Mounjaro sales of $18.4 B in 2025 and $22.8B in 2026, and Zepbound jumping from $4.9B (2024) to $12.5 B in 2025 (and $18.1B in 2026). In other words, Lilly’s tirzepatide sales are expected to surpass Novo’s by 2026.

Want to see the full blueprint behind that higher fair value? According to eat_dis_watermelon, it rests on strong revenue expansion, rising margins and a rich future earnings multiple working together.

Result: Fair Value of $1,189.18 (UNDERVALUED)

However, this bullish setup still faces real pressure points, including potential GLP 1 safety headlines or lawsuits, as well as any delay to new manufacturing capacity coming online.

Another View: Rich Multiples Signal Less Room For Error

That 21.3% “undervalued” story sits alongside a very different message from Eli Lilly's current P/E ratio of 40.6x, which stands above the US Pharmaceuticals industry at 16.4x, the peer average at 19.1x, and even the fair ratio estimate of 39.5x. In plain terms, you are paying a premium price where expectations already run high. The question becomes how comfortable you are if the story turns out to be less perfect than hoped.

Next Steps

With such mixed signals around valuation and growth expectations, it is worth taking a closer look at the underlying numbers yourself and moving quickly to form your own view. A good place to start is by weighing up 4 key rewards and 2 important warning signs

Looking for more investment ideas?

If Eli Lilly has your attention, do not stop here. Broaden your watchlist with a few focused stock ideas that could sharpen your next move.

• Target reliable income streams by reviewing 12 dividend fortresses that may suit an investor who wants yield and resilience in one package.
• Spot potential mispricings early by scanning screener containing 25 high quality undiscovered gems before they appear on every headline and watchlist.
• Prioritise capital preservation by checking 67 resilient stocks with low risk scores that aim to balance growth potential with lower risk scores.

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.