Eli Lilly And Co DCF Valuation: Is The Stock Undervalued?

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As part of a new series, each week we typically conduct a DCF on one of the companies in our screens. This week we thought we’d take a look at one of the stocks that is not currently in our screens, Eli Lilly and Co ().

Profile
Eli Lilly is a drug firm with a focus on neuroscience, cardiometabolic, cancer, and immunology. Lilly’s key products include Verzenio for cancer; Mounjaro, Zepbound, Jardiance, Trulicity, Humalog, and Humulin for cardiometabolic; and Taltz and Olumiant for immunology.

Recent Performance
Over the past twelve months the share price is up 61.77%.Source: Google FinanceInputs

Discount Rate: 5%

Terminal Growth Rate: 4%

WACC: 5%

Forecasted Free Cash Flows (FCFs)

Year FCF (billions) PV(billions) 2024 4.54 4.32 2025 5.06 4.59 2026 5.64 4.87 2027 6.28 5.17 2028 7 5.48

Terminal ValueTerminal Value = FCF * (1 + g) / (r – g) = 728.00 billionPresent Value of Terminal ValuePV of Terminal Value = Terminal Value / (1 + WACC)^5 = 570.41 billionPresent Value of Free Cash FlowsPresent Value of FCFs = ∑ (FCF / (1 + r)^n) = 24.44 billionEnterprise ValueEnterprise Value = Present Value of FCFs + Present Value of Terminal Value = 594.84 billionNet DebtNet Debt = Total Debt – Total Cash = 25.53 billionEquity ValueEquity Value = Enterprise Value – Net Debt = 569.31 billionPer-Share DCF ValuePer-Share DCF Value = Enterprise Value / Number of Shares Outstanding = $632.57

Conclusion

DCF Value Current Price Margin of Safety $632.57 $921.49 -45.67%

Based on the DCF valuation, the stock is overvalued. The DCF value of $632.57 share is lower than the current market price of $921.49. The Margin of Safety is -45.67%.More By This Author: