The drug will help treat smokers who have lung cancer. The controversy is over drug-pricing. Many doctors have been vocal about that the price is too high, because in a clinical trial, it only extended lives of patients by just six to seven weeks.
Is now a good time to buy Eli Lilly, or will this drug-pricing debate dent the stock?
Here is the Eli Lilly's stock recommendation, according to TheStreet Ratings,TheStreet's proprietary ratings tool.
TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a buy yielded a 16.56% return in 2014, beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a buy yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
Check out which stocks made the list. And when you're done, be sure to read about which safe, A+ rated stocks you should buy now. Year-to-date returns are based on August 27, 2015 closing prices.
Eli Lilly and Company discovers, develops, manufactures, and sells pharmaceutical products worldwide. It operates through two segments, Human Pharmaceutical Products and Animal Health Products.
TheStreet Ratings team rates LILLY (ELI) & CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate LILLY (ELI) & CO (LLY) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- LLY's revenue growth has slightly outpaced the industry average of 7.0%. Since the same quarter one year prior, revenues slightly increased by 0.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The current debt-to-equity ratio, 0.55, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.01, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for LILLY (ELI) & CO is currently very high, coming in at 84.30%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 12.06% trails the industry average.
- Compared to its closing price of one year ago, LLY's share price has jumped by 40.83%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- LILLY (ELI) & CO's earnings per share declined by 17.6% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, LILLY (ELI) & CO reported lower earnings of $2.23 versus $4.31 in the prior year. This year, the market expects an improvement in earnings ($3.28 versus $2.23).
- You can view the full analysis from the report here: LLY Ratings Report