1 Stock That Should Be in Every Investor's Portfolio
Key Points
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Pharmaceutical giant Eli Lilly’s product lineup is just looking too good to pass up.
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Drugs for obesity and diabetes, along with a strong pipeline, make this a must-have stock.
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If the company’s own guidance holds true, its valuation still remains reasonable.
It’s not often that something as influential as an effective weight loss drug comes on the market. Eli Lilly (NYSE: LLY) has that product. They also have a leading treatment for diabetes and a burgeoning treatment for Alzheimer’s. These multiple treatment avenues have the company set to rake in quite a bit of money as long as they don’t screw it up.
My general take here is that the remarkable revenue growth we saw last year can continue moving forward. Obesity is a major factor, especially in the United States, and a drug like Zepbound stands to receive serious demand as more and more people learn about its potential. Even with its volatility and modestly higher valuation, I think Eli Lilly has room to run.
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Areas of growth
Eli Lilly is the largest healthcare company with a total market valuation of over $700 billion. Mounjaro is its leading drug. Used to treat type 2 diabetes, it brought in roughly $5.2 billion worldwide in Q2 revenue. That marks a 68% increase year over year. In the U.S. alone, revenue increased 37% to $3.3 billion.
Image source: Getty Images.
Its second-largest select product is Zepbound. Used primarily as a drug for weight loss, this is the fastest-growing of the company’s leading selected products, with $3.38 billion in U.S. sales in the second quarter of 2025. This is by far the fastest-growing piece of the business, with total revenue for the product increasing 172% year over year.
I think this is a huge area for potential expansion. According to the CDC, between August 2021 and August 2023, the obesity rate in adults was 40.3%. That’s a huge market for Eli Lilly’s Zepbound drug.
The third most important drug is Verzenio, which is used to treat forms of breast cancer. Total worldwide sales increased 12% in the second quarter to $1.49 billion. The primary area of growth for this drug was outside the U.S., where revenue grew 19% to $560.3 million year over year.
Outside of these established avenues for income, Eli Lilly has new potential on the Alzheimer’s front with Donanemab. Donanemab was recently approved for the treatment of early Alzheimer’s disease and offers a new weapon in Eli Lilly’s arsenal. Alzheimer’s is a crippling disease that impacts over 7 million Americans alone.
Overall, I think these are all remarkable avenues for growth for Eli Lilly. The company’s GLP-1 drugs for obesity and diabetes are at the forefront of two very in-demand areas of medicine. Moreover, there’s opportunity with the Alzheimer’s medication, which is new and quite sought-after.
Most recent financials and pipeline
Over the past two years, we’ve seen strong results from Eli Lilly. In fiscal 2023 and 2024, revenue increased 19.5% and 32% respectively. Between fiscal 2023 and 2024, net income nearly doubled to $10.6 billion.
In all, Eli Lilly’s second-quarter 2025 results were solid. Q2 revenue gained 38% year over year to $15.56 billion. You know — chump change. Net income increased a whopping 91% to $5.66 billion, while earnings grew 92% to $6.29 per share.
I feel incredibly positive about Eli Lilly’s prospects. As I already mentioned, the obesity market is fairly large in the U.S., let alone the world. Type 2 diabetes is also a prevalent disease, with one in 10 Americans having one of the two types. Between these two avenues, I think Ely Lilly has quite a bit of room to run, even with its high valuation. Healthcare stocks are hit-and-miss, based on clinical trials and successful products, but Ely Lilly seems to be doing everything right at the moment.
Looking down the road, there are some decent things in the pipeline. Lilly is working on another obesity drug, Orforglipron, and Mounjaro SURPASS-CVOT for type 2 diabetes as well as heart disease. This is just a small mention from the long list of drugs in the pipeline, and I feel incredibly optimistic for Eli Lilly’s long-term results. I’m not the only one, as many top hedge funds and managers are involved in the stock.
Looking forward, guidance is calling for 2025 earnings per share of $20.85 to $22.10. Conservatively, that would give the company a forward valuation of 36 times earnings. In all, this comes in below the current trailing P/E ratio of 49, and, given the growth rates being displayed, I don’t think it’s a high valuation at all. Keep an eye on Eli Lilly, because it’s going to be a stock that we all will wish we’d bought years ago.
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David Butler has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.