There are some good reasons why investors might want to avoid Eli Lilly (LLY 2.05%). For example, its price-to-earnings ratio is high at 40x, and its yield is very low at just 0.6%. But there are also some very good reasons to buy the drug maker’s shares, noting that it is a leader in the merging GLP-1 weight-loss market. Here are three reasons to buy Eli Lilly as it looks to leverage its success to create a brighter tomorrow.
1. Eli Lilly is the GLP-1 leader
Eli Lilly’s P/E ratio is high for a very good reason. It was second to market with a GLP-1 shot, but it quickly overtook Novo Nordisk (NVO 0.18%), which was the first to market with a GLP-1 shot (Wegovy). And the sales growth Eli Lilly’s Mounjaro and Zepbound have achieved is nothing short of incredible.
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In 2025, Mounjaro’s sales rose 99%. Zepbound’s sales increased even more, rising 175%. That kind of sales growth isn’t sustainable over the long term, but the first quarter was still shockingly strong, with Mounjaro’s sales up 125% and Zepbound’s higher by 80%. Essentially, the high valuation here is being awarded because of very clear success.
What’s interesting is that Eli Lilly’s stock price is near all-time highs, but its P/E ratio is actually dropping. Essentially, the company is growing into its valuation. Value investors probably won’t find the stock interesting, but growth investors shouldn’t ignore it because of its lofty P/E ratio.
LLY data by YCharts
2. Eli Lilly continues to innovate
The next big step in the GLP-1 market is a pill version of the weight-loss drugs, which Novo Nordisk was first to launch. Consumers prefer to take pills over using injections. This advance is expected to materially broaden the market for GLP-1 drugs. Eli Lilly has also introduced a GLP-1 pill, showing that it continues to innovate in the space.
There’s a slight issue, however, because it appears that Novo Nordisk’s pill is more effective than Eli Lilly’s. That said, Novo Nordisk’s GLP-1 pill comes with dietary restrictions that Eli Lilly’s pill avoids. So there could be room for both pills on the market. Still, the big story is that Eli Lilly’s research and development efforts haven’t stopped in the GLP-1 space or elsewhere, leading things to the next key positive.
Today’s Change
(-2.05%) $-23.82
Current Price
$1137.13
Key Data Points
Market Cap
$1.1T
Day’s Range
$1133.92 – $1168.88
52wk Range
$623.78 – $1182.73
Volume
108.1K
Avg Vol
3.2M
Gross Margin
82.83%
Dividend Yield
0.57%
3. Eli Lilly is using the GLP-1 windfall to good effect
Mounjaro and Zepbound currently make up nearly two-thirds of Eli Lilly’s sales. Management realizes that its product portfolio is unbalanced. It is attempting to ride the success of its GLP-1 drugs while, at the same time, preparing for a future without them. That is the normal cycle in the pharmaceutical sector because drug patents are time-limited. When patents end, revenues and earnings can decline materially.
This is why Eli Lilly has ramped up its acquisitions, effectively buying interesting drug candidates and entering entirely new product categories. For example, it just announced a trio of acquisitions that will allow the company to build an infectious disease business. The company is very open about the likelihood of more acquisitions. Given the situation, this is likely the right course of action and exactly what investors should want to see, as it bolsters the company’s ability to develop drugs to replace GLP-1s when patent protection ends.
Eli Lilly isn’t cheap, but it is executing very well
To reiterate, Eli Lilly is an expensive stock. However, there is a good reason for that, and growth-oriented investors will likely still find it attractive. The three biggest positives are the drug maker’s GLP-1 success, ongoing innovation (with GLP-1 drugs and beyond), and its prudent use of its GLP-1 windfall to build for the future.
