Eli Lilly and CompanyLLYNYSE

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Sell

Fair Value: $876.92 per share(market-calibrated)

-13.9%

Upside to Fair Value

Current

$1,017.97

Pure Model

$866.94

Fair Value

$876.92

Bull Case

$1,241.83

Bear Case

$608.74

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

3.53%

Calibrated Growth

3.08%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $866.94.

What's Driving This Ratingfor LLY

↓

CapEx normalizing toward maintenance

Historical CapEx is 8.78% of revenue (heavy investment phase). Model fades this to 3.50% by Year 10, freeing up ~$8.5B in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 27.79% — below the sector mature average of 45.56%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $44.9B (27.79% margin).

↑

Strong near-term revenue growth

Analyst consensus projects 25.05% revenue growth in Year 1, fading to 8.04% by Year 5 and 3.00% by Year 10. Revenue reaches $161.6B by Year 10 (vs $65.2B today).

✓

Model and market roughly agree

Market-implied terminal growth of 3.53% is close to the model's 3.00% (only 53bps apart). The DCF assumptions are well-aligned with how the market is pricing this stock.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 69.64% indicates efficient cash generation. FCF reaches $34.2B by Year 10 (21.14% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.39

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)6.27%

Cost of Debt

Pre-tax Cost of Debt1.29%

Tax Rate19.79%

After-tax Cost of Debt1.03%

Equity Weight (E/V)95.56%

Debt Weight (D/V)4.44%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (95.56% × 6.27%) + (4.44% × 1.03%)

= 6.04%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$81.5B	$106.8B	$126.6B	$143.7B	$161.6B
EBIT	$22.6B	$29.7B	$35.2B	$39.9B	$44.9B
Tax	$4.5B	$5.9B	$7.0B	$7.9B	$8.9B
NOPAT	$18.2B	$23.8B	$28.2B	$32.0B	$36.0B
+ Depreciation	$2.1B	$2.7B	$3.2B	$3.7B	$4.1B
- Capex	$7.2B	$8.1B	$8.1B	$7.6B	$5.7B
- Δ NWC	$1.2B	$910M	$696M	$603M	$348M
Free Cash Flow	$11.9B	$17.5B	$22.6B	$27.5B	$34.2B
Discount Factor	0.943	0.839	0.746	0.663	0.556
Present Value	$11.2B	$14.7B	$16.9B	$18.3B	$19.0B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$34.2B

Terminal Growth Rate3.00%

WACC6.04%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$1.2T

PV of Terminal Value$643.9B

Exit Multiple Method

Year 10 EBITDA$49.1B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$1.2T

PV of Terminal Value$654.9B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$164.4B

PV of Terminal Value$643.9B

Enterprise Value$808.3B

(-) Net Debt$35.3B

Equity Value$773.0B

Shares Outstanding898M

Price per Share$860.79

Exit Multiple Method

PV of Projected FCFs$164.4B

PV of Terminal Value$654.9B

Enterprise Value$819.4B

(-) Net Debt$35.3B

Equity Value$784.0B

Shares Outstanding898M

Price per Share$873.08

Pure Model Fair Value

$866.94

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
4.04%	$1,247.07	$1,210.37	$1,158.70	$1,109.47	$1,062.56
5.04%	$945.62	$1,024.74	$1,142.64	$1,109.47	$1,062.56
6.04%	$775.58	$814.81	$866.94	$939.59	$1,047.85
7.04%	$660.88	$683.41	$711.52	$747.57	$795.47
8.04%	$575.56	$589.73	$606.71	$627.43	$653.28

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$608.74

-40.2% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.49

Base Case

$866.94

-14.8% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.39

Bull Case

$1,241.83

22.0% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.33

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Healthcare Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth25.05%

Year 3 Revenue Growth13.05%

Year 5 Revenue Growth8.04%

Year 7 Revenue Growth6.03%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin27.79%

Terminal EBIT Margin45.56%

Tax Rate19.79%

Historical Capex / Rev8.78%

Terminal Capex / Rev3.50%

NWC / Revenue7.38%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 24x EV/EBITDA (Healthcare sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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