Have you been paying attention to shares of Eli Lilly and (LLY)? Shares have been on the move with the stock up 4.7% over the past month. The stock hit a new 52-week high of $107.24 in the previous session. Eli Lilly and has gained 26.7% since the start of the year compared to the 6.4% move for the Zacks Medical sector and the 7.3% return for the Zacks Large Cap Pharmaceuticals industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on July 24, 2018, Lilly reported EPS of $1.5 versus consensus estimate of $1.31 while it beat the consensus revenue estimate by 4.27%.
For the current fiscal year, Lilly is expected to post earnings of $5.47 per share on $24.45 billion in revenues. This represents a 27.8% change in EPS on a 6.92% change in revenues. For the next fiscal year, the company is expected to earn $5.73 per share on $24.63 billion in revenues. This represents a year-over-year change of 4.83% and 0.74%, respectively.
Lilly may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Lilly has a Value Score of C. The stock's Growth and Momentum Scores are A and F, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 19.6X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 19.3X versus its peer group's average of 12.1X. Additionally, the stock has a PEG ratio of 1.78. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Lilly currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Lilly passes the test. Thus, it seems as though Lilly shares could still be poised for more gains ahead.
How Does Lilly Stack Up to the Competition?
Shares of Lilly have been rising, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also solid potential picks, including Homology Medicines (FIXX), Nektar Therapeutics (NKTR), and Vertex Pharmaceuticals (VRTX), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
The Zacks Industry Rank is in the top 39% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Lilly, even beyond its own solid fundamental situation.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free reportEli Lilly and Company (LLY): Free Stock Analysis ReportVertex Pharmaceuticals Incorporated (VRTX): Free Stock Analysis ReportNektar Therapeutics (NKTR): Free Stock Analysis ReportHomology Medicines, Inc. (FIXX): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research