Eli Lilly's Growth Rate Is Fantastic, but This Number Is Even Better

Core Viewpoint - Eli Lilly's current high valuation may be justified by its rapid earnings growth, particularly driven by its successful diabetes drug Mounjaro and its new weight-loss treatment Zepbound, which could become the company's top seller in the near future [1][2]. Financial Performance - For the three-month period ending June 30, Eli Lilly's revenue increased by 36% year over year to $11.3 billion, largely due to the growth of Mounjaro and Zepbound [2]. - The company's operating income rose by 75$3.7 billion, despite incurring asset impairment and restructuring charges totaling $435 million during the period [2]. - Net income climbed by 68$3 billion, indicating strong earnings growth that supports the company's high valuation of $830 billion [2]. Growth Potential - Eli Lilly's stock trades at over 100 times its trailing profit, but the expected high earnings growth rate may mitigate concerns about its valuation [3]. - The company is positioned for significant future growth, which could make the stock appear less expensive than it currently seems [3]. Profitability Metrics - Eli Lilly's gross profit margin was 81% last quarter, with revenue rising by 36% while the cost of sales increased by only 20%, indicating operational efficiency [4]. - Maintaining high gross profit margins can lead to substantial earnings growth, as incremental sales growth will largely contribute to the bottom line [4]. Investment Outlook - Eli Lilly is expected to continue experiencing high sales growth, supported by impressive gross profit margins, which enhances confidence in its ability to increase earnings rapidly [6]. - The company faces challenges in meeting soaring product demand but is well-positioned to invest in operations to strengthen its manufacturing capabilities [6]. - With strong growth prospects and high margins, Eli Lilly stock is considered an excellent long-term investment opportunity [6].