Is LLY a buy, hold, or sell?
LLY carries a valuation grade of Buy. The trailing P/E of 40.3 sits 83% above the Healthcare sector median of 22.0x — a premium that demands sustained earnings delivery. Our discounted cash flow model produces an intrinsic range of $865–$1,579 — implying a +8% margin of safety at the current price of $1,136.37. The width of the DCF range reflects genuine uncertainty in the terminal growth rate assumption: the correct framework is a probability-weighted distribution over scenarios, not a single point estimate. See the DCF valuation framework for full methodology.
With a 12% beat rate on recent quarters, earnings predictability has been mixed. The most recent quarter delivered a 25.9% earnings surprise. Analyst estimate revisions are trending upward.
What are LLY's key risk factors?
With a beta of 0.52, LLY exhibits a defensive risk profile relative to the broad market. The 95th-percentile CVaR of -17.8% on a one-month horizon should inform position sizing directly: at a 10% portfolio weight, this tail event contributes approximately 1.8% of total portfolio loss in the worst 5% of months. Net margins of 35.0% are significantly above the Healthcare sector average of 18%, reflecting durable pricing power. Return on equity of 107.5% indicates highly efficient capital allocation. Leverage is moderate with debt-to-equity at 139%.
At 0.00, the put/call ratio skews bullish, with call buyers dominating recent flow. Implied volatility of 2.1% is below realized volatility of 31.1%, potentially making options relatively cheap. Insiders have been net sellers to the tune of $3748.2M recently. While routine dispositions are common, the magnitude bears watching. Short interest is low at 1.1% of float, suggesting limited bearish conviction.
How does LLY fit in a diversified portfolio?
At typical HENRY portfolio weights — 10–20% of the equity allocation — LLY carries a beta of 0.52, meaning it amplifies broad market moves proportionally. The appropriate weight is not a function of conviction alone, but of the full covariance structure across all buyings. See the Ledoit-Wolf covariance framework for the methodology behind these calculations.
Among closely correlated names, LLY shows the strongest co-movement with PFE (0.32), JNJ (0.30), ABBV (0.29). Investors seeking diversification should note these correlation dynamics when constructing multi-asset portfolios.
True portfolio risk is a function of the full covariance structure across all buyings — not individual stock metrics. The Portfolio Health Check quantifies this at the portfolio level: it surfaces hidden concentration, marginal CVaR contributions, and the degree to which your overall allocation deviates from an optimal risk-adjusted mandate. The LLY analysis here is a single node in that larger structure.
For the portfolio construction framework underpinning LLY’s position sizing and conviction rating — including IPS guardrails, Black-Litterman allocation, and CVaR constraints — see: Investment Policy Statement Framework →
