In: Finance
In the attached table, you are given valuation ratios for Eli Lily & Co. as well as select competitors and the pharmaceutical and biotech industry. Using this data, assess whether Eli Lily & Co. is correctly valued. Explain your rationale. If, in your opinion, it is not correctly valued, explain whether it is overvalued or undervalued and the basis for your opinion and what ratios support your conclusion.
Row headers in order: Price to earnings (P/E), Price to next year expected earnings, Price-earnings-growth (PEG), Price to operating profit (P/OP), Price to sales (P/S), Price to book value (P/BV)
Eli Lilly & Co. |
Amgen Inc. |
Biogen Inc. |
Gilead Sciences Inc. |
Pfizer Inc. |
Regeneron Pharmaceuticals Inc. |
Vertex Pharmaceuticals Inc. |
Zoetis Inc. |
Pharmaceuticals & Biotechnology |
|
Price to earnings (P/E) |
17.79 |
17.37 |
10.00 |
17.96 |
12.23 |
28.08 |
58.33 |
40.35 |
23.05 |
Price to next year expected earnings |
15.45 |
15.25 |
7.52 |
14.19 |
11.62 |
23.07 |
53.11 |
28.82 |
21.54 |
Price-earnings-growth (PEG) |
1.17 |
1.25 |
0.30 |
0.68 |
2.32 |
1.29 |
5.93 |
1.01 |
3.28 |
Price to operating profit (P/OP) |
29.75 |
14.08 |
8.36 |
22.56 |
15.11 |
26.88 |
57.32 |
30.77 |
20.21 |
Price to sales (P/S) |
6.63 |
6.13 |
4.10 |
4.37 |
3.85 |
7.55 |
16.49 |
9.67 |
4.95 |
Price to book value (P/BV) |
56.77 |
14.08 |
4.41 |
4.29 |
3.15 |
5.36 |
11.28 |
22.35 |
5.49 |
The stock is valued low as compared to its competitor. It has a slightly higher PE than Biogen and pfizer, however it has a very low PE and Leading PE ratio compared to its competitors Vertex and Zoetis.
Though its PE ratio is higher than Pfizer, but its PEG ratio is comparatively very lower than Pfizer, thus the PE to growth opportunities isnt even better than its competitors. The PEG isnt even better than most of its competitors.
Price to Operating Earnings shows a better return to the
investors. At comparable ratio to the industry Leading companies
like Zoetis and vertix
A very higher Price to Book Value, as compared to its competitors
is a strong indicator. that the stock is highly over valued.
In a nutshell the company Eli Lily & Co ltd is not a share
worth investing. Its valuations shows it is over valued, with lower
growth opportunities. It may not be a good option to invest, as
compared to its competitors