Do you think Eli Lilly stock has peaked? These 10 words from the CEO may change your mind

Eli Lilly (LLY -0.92%) the stock is up 770% in five years. It is trading at new all-time highs in 2024 due to the incredible success and popularity of its diabetes and weight loss products, Mounjaro and Zepbound. But with the stock sitting at a market cap of $850 billion and a whopping 117 price-earnings multiple, one might think it’s ludicrous to expect it could still be a good buy.

Normally, I would agree and say that at such a huge valuation, the stock is too expensive to buy. But given Eli Lilly’s fantastic growth prospects, an exception may be warranted in this case. And based on what the company’s CEO said recently, there’s plenty of reason to remain optimistic about its future.

The company didn’t need to put a lot of money behind its new drugs

You know a company has a good product when they don’t have to spend aggressively to market it to increase sales. Conversely, if a company has to spend heavily on sales and marketing to generate revenue growth, that’s usually a red flag for investors. This may mean that aggressive discounts and promotional activities are needed to get customers to place orders. But that’s not the case with Eli Lilly.

In a recent interview with CNBC, the company’s CEO, David Ricks, discussed the strong growth the business is experiencing with its new drugs. And when he spoke about Zepbound, he referred to it as having “incredible demand” and said: “We’re not even trying that hard to promote this drug.”

Sales were up for Zepbound and Mounjaro

For years, Eli Lilly’s business has relied heavily on its top-selling diabetes drug Trulicity for growth. But with the approval of Mounjaro for diabetes and Zepbound for weight loss, it’s a much different situation today for the company. Trulicity is no longer Eli Lilly’s best-selling product. In fact, it’s barely hanging on for 3rd place.

In its most recent period, which ended June 30, Trulicity’s sales totaled $1.2 billion and were less than half of the $3.1 billion Mounjaro generated. It’s only slightly ahead of Zepbound, but as the launch of the recently approved weight loss drug continues, its sales will likely grow much more than Trulicity in the near future. In addition to Mounjaro and Zepbound, breast cancer drug Verzenio also brought in more sales than Trulicity last quarter ($1.3 billion).

Total revenue growth for Eli Lilly in the second quarter was 36%, with sales topping $11.3 billion. But with tirzepatide, the active ingredient in Zepbound and Mounjaro, which may bring in $50 billion or more in revenue at its peak (according to analysts), there could still be a lot more room for the company’s top line to grow a lot more in the coming years. .

It may not be too late to invest in Eli Lilly stock

Eli Lilly’s stock is undoubtedly expensive. But it trades at a high price because it has the best weight loss drug on the market right now. And with the many obesity-related diseases that tirzepatide can help, the sky may be the limit for Eli Lilly’s stock.

While it is drawing earnings multiple seems high, the stock’s price-to-earnings-growth ratio of 1.3 indicates that the stock may not be as overvalued when considering its long-term growth opportunities. And as tirzepatide gains approval for other indications, analysts are likely to upgrade their forecasts for the drug, which in turn could lead to more upside for the healthcare stock as well.

Despite the seemingly expensive valuation, if you’re willing to buy and hold shares of Eli Lilly, this can still make for an excellent growth stock to keep in your portfolio for the long term.