Eli Lilly's Stock: Poised for a Growth Rally That Value Investors Shouldn't Miss

Key Points

• Regulatory approval of its GLP-1 pill could be a major catalyst for stock performance
• Current GLP-1 injectable medications already generate billions in revenue
• Despite appearing expensive by short-term metrics, long-term valuation indicators suggest strong growth potential

Eli Lilly (NYSE: LLY) shares have underperformed in 2023, down over 4% year-to-date as of last week. This recent performance stands in stark contrast to the pharmaceutical giant's impressive five-year return of approximately 400%. The market enthusiasm that previously drove the stock appears to have temporarily cooled.

However, patient investors with a long-term perspective have compelling reasons to remain optimistic about Lilly's future trajectory. The current price consolidation may present an opportunity before the next potential growth phase begins. Here's why this pharmaceutical powerhouse might be preparing for a significant upward movement, and why forward-thinking investors may want to consider building a position sooner rather than later.

GLP-1 Weight Loss Pill Approval: The Next Major Catalyst

While Eli Lilly maintains a diverse drug portfolio, the primary market driver currently centers on its GLP-1 medications. These innovative treatments represent the cornerstone of the company's growth strategy and have already generated billions in revenue this year alone.

The stock experienced significant volatility on August 7 when trial results for orforglipron, Lilly's experimental GLP-1 weight loss pill, showed patients losing approximately 12% of body weight on the highest dosage during a 72-week trial. This fell short of analysts' 15% expectations, triggering a sell-off.

However, subsequent data released on August 26 revealed the pill's effectiveness in lowering blood sugar levels for diabetes patients. While weight loss in this group was slightly lower at 10.5% on the highest dose, the comprehensive results were positive, with the drug meeting all primary endpoints in the trial.

The company now reports having sufficient data to proceed with regulatory filing. Assuming a smooth approval process, Lilly anticipates launching the oral GLP-1 treatment approximately one year from now – a potentially transformative milestone for both patients and investors.

Expanding an Already Growing Market Position

Obesity and diabetes represent two of the most significant health challenges globally, making a pill addressing both conditions a potential game-changer for Eli Lilly. First-mover advantage in this pharmaceutical innovation cycle could provide substantial competitive benefits. Earlier market entry means more accumulated patient data, established safety profiles, and higher barriers to entry for subsequent competitors.

In recent years, Lilly has dramatically accelerated its revenue growth through its injectable GLP-1 medications, Zepbound (targeting weight loss) and Mounjaro (for diabetes management). However, an oral GLP-1 formulation could significantly expand market reach by addressing patient preference for pill-based treatments over injections, potentially opening an even larger addressable market.

This innovation pattern resembles breakthrough moments in other industries where early technological leaders establish dominant positions – similar to how certain protocols gained adoption advantage in emerging markets by solving fundamental user experience issues.

Value Beyond Traditional Metrics

With a price-to-earnings ratio near 50, Eli Lilly might appear expensive using conventional valuation methods. However, this perspective only captures a short-term snapshot without accounting for substantial growth potential. The forward P/E ratio of just 24 reflects analysts' expectations for accelerating earnings growth.

Even more compelling for long-term investors is the five-year price-to-earnings-growth (PEG) ratio of only 0.80. Financial analysts typically consider a PEG below 1.0 to indicate an undervalued growth opportunity – suggesting the current price may actually represent good value relative to Lilly's long-term prospects.

Healthcare stocks broadly have underperformed in 2023, likely due to concerns about potential tariffs and drug pricing reform. However, these short-term market reactions often create opportunities for investors with longer time horizons. For those planning to hold positions for several years, Eli Lilly's robust growth prospects make it particularly attractive during periods of temporary price weakness.

The current consolidation phase could simply represent accumulation before the next significant growth phase – particularly if regulatory approval for orforglipron materializes as anticipated. For diversified investors seeking exposure to innovation-driven growth outside volatile markets, pharmaceutical leaders with breakthrough products offer an interesting alternative growth vector worth considering.