The Eli Lilly and Co (LLY) DCF Valuation: Is The Stock Undervalued?

Johnny HopkinsStock Screener1 Comment

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 are not currently in our screens, Eli Lilly and Co (LLY).


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 diabetes; and Taltz and Olumiant for immunology.

Recent Performance

Over the past twelve months the share price is up 59.34%.

LLY Chart

LLY data by YCharts


  • Discount Rate: 5.3%
  • Terminal Growth Rate: 2%
  • WACC: 5.3%

Forecasted Free Cash Flows (FCFs)

Year FCF (billions) PV(billions)
2024 5.31 5.04
2025 5.71 5.15
2026 6.15 5.27
2027 6.6 5.37
2028 7.1 5.48

Terminal Value

Terminal Value = FCF * (1 + g) / (r – g) = 219.45 billion

Present Value of Terminal Value

PV of Terminal Value = Terminal Value / (1 + WACC)^5 = 169.51 billion

Present Value of Free Cash Flows

Present Value of FCFs = ∑ (FCF / (1 + r)^n) = 26.31 billion

Enterprise Value

Enterprise Value = Present Value of FCFs + Present Value of Terminal Value = 195.83 billion

Net Debt

Net Debt = Total Debt – Total Cash = 8.58 billion

Equity Value

Equity Value = Enterprise Value – Net Debt = 187.25 billion

Per-Share DCF Value

Per-Share DCF Value = Enterprise Value / Number of Shares Outstanding = $197.31


DCF Value Current Price Margin of Safety
$197.31 $581 -194.46%

Based on the DCF valuation, the stock is overvalued. The DCF value of $197.31 per share is lower than the current market price of $581. The Margin of Safety is -194.46%.

It is important to note that this valuation is based on a number of assumptions, and these assumptions could change in the future. This valuation is meant to be a back-of-the-envelope analyse that could be used as a starting point in a much more thorough valuation process. As a result, it is important to do your own research before making any investment decision.

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One Comment on “The Eli Lilly and Co (LLY) DCF Valuation: Is The Stock Undervalued?”

  1. These DCF valuations always seem to produce a valuation that’s far in excess of the current share price.

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