Eli Lilly (LLY)

This valuation, completed in March 2024, combines DCF (FCFF + FCFE)with a 9-peer relative valuation to anchor Eli Lilly's intrinsic price between $595 and $635, with a base-case target of $627 against the March 2024 reference price of $579. I rate this a BUY.

Three catalysts drive the call: (1) Mounjaro/Zepbound scaling into the $82B weight-loss drug market projected by 2032, (2) Retevmo reaching $4.4B peak sales by 2025 in oncology, and (3) the pharma pipeline absorbing expected margin pressure from the Inflation Reduction Act beginning 2026.

Relative valuation implies a much lower $136–$211 range, but LLY's multiples (P/E 88x, EV/EBITDA 75x) sit as statistical outliers against pharma peers, a signal that the market is already pricing in the GLP-1 growth story. The DCF captures this future cash flow directly and is given the dominant weight.

Seven methods, one picture: DCF (intrinsic) validates the BUY, while multiples (relative) flag that Eli Lilly trades far above its pharma peers on every ratio.

DCF results are discounted at WACC = 5.79%. Relative multiples use the median of 9 peers (Pfizer, BMY, AbbVie, Novartis, GSK, Amgen, Novo Nordisk, Gilead, Merck).

CAPM-derived cost of equity using 5-year monthly LLY/S&P 500 returns. LLY's low beta (0.29), typical of defensive healthcare, keeps the discount rate tight and amplifies the present-value contribution of long-dated cash flows.

Forecasted bottom-up by product and region. The 2025 growth inflection is driven by Retevmo's projected $4.4B peak sales and Mounjaro/Zepbound's GLP-1 ramp into the obesity market.

Revenue forecast CAGR (2023–2027): ~30%. Perpetual growth rate uses industry peer median rather than a Gordon model to avoid over-extrapolating current GLP-1 momentum.

Six drivers flex across three cases: Revenue, COGS, R&D, SG&A, irregular income, and net debt. Bear case embeds a hard-landing recession and tighter IRA renegotiation; bull case assumes rate cuts + faster Mounjaro adoption.