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The latest earnings announcement Eli Lilly and Company (NYSE:LLY) released in December 2018 showed that the company turned profitable again after incurring losses in the last financial year. Below, I’ve laid out key growth figures on how market analysts predict Eli Lilly’s earnings growth trajectory over the next few years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Market analysts’ prospects for the coming year seems optimistic, with earnings expanding by a robust 38%. This growth seems to continue into the following year with rates arriving at double digit 74% compared to today’s earnings, and finally hitting US$6.5b by 2022.
Although it’s useful to be aware of the growth rate year by year relative to today’s value, it may be more insightful evaluating the rate at which the earnings are rising or falling every year, on average. The advantage of this technique is that it ignores near term flucuations and accounts for the overarching direction of Eli Lilly’s earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I’ve appended a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 15%. This means, we can presume Eli Lilly will grow its earnings by 15% every year for the next few years.
For Eli Lilly, there are three fundamental factors you should look at:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is LLY worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether LLY is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of LLY? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.