Flat across the past 52 weeks, and down 3% since the year began, Eli Lilly and Co. (NYSE:LLY) has had a hard time keeping up with the rest of the stock market lately. But according to one analyst, that's all about to change -- and Lilly doesn't even need a blockbuster to prove it.

This morning, megabanker Goldman Sachs announced that it is upgrading shares of Eli Lilly from neutral to buy, and assigning the stock a $95 price target. If Goldman is right about that, new investors stand to earn an 18% profit on Eli Lilly stock, and collect a 2.5% dividend yield on top of it, resulting in total returns of better than 20% on their investment.

But is Goldman Sachs right? Here are three things you need to know.

Goldman Sachs thinks Eli Lilly investors could be sitting on potentially big profits. Image source: Getty Images.

1. "A long lasting period of accelerating revenue and EPS growth"

Despite the stock's lackluster performance of late, Goldman Sachs sees a bright future for Eli Lilly -- which is kind of curious. Just five years ago, Wall Street was worrying that all of big pharma -- Lilly included -- would tumble off a "patent cliff" and break its collective neck. But just five years later, Goldman says that today, Eli Lilly boasts "a diversified late stage pipeline" of drugs coming to market. 

These drugs, argues Goldman, will enable "many years of margin expansion" at Lilly, ushering in "a long lasting period of accelerating revenue and EPS growth" for the drugmaker. As sketched out in a write-up on StreetInsider.com this morning, Goldman describes how Lilly stock "can grow earnings by double digits over the next five years and by high single digits out to 2025 as it has among the most durable franchises in the industry."

2. How good could this get?

Goldman predicts "$12.5 [billion] of new product sales by 2020" at Lilly, which will account for "nearly 50% of total sales" that year. That implies total sales of $25 billion -- about 20% greater than what Lilly collects in revenue today. (And that number could be conservative. According to data from S&P Global Market Intelligence, the consensus expectation for Lilly's sales in 2020 is $26.6 billion).

Granted, that still won't put Lilly in the same league as Merck (NYSE:MRK) or Pfizer (NYSE:PFE), expected to grow revenue to $44 billion and $58 billion, respectively. But relative to the revenues these three Big Pharma giants collect today, Goldman's projections for Lilly imply that Lilly stock will grow its revenue twice as fast as either Merck or Pfizer. Additionally, Goldman says that Lilly is already starting to "show improvements" in its "operational performance," where operating profit margin hit 18.8%.

3. Ace in the hole

Again, an 18.8% margin falls short of the big boys. Last year, Merck outclassed Lilly on margins by 2 full percentage points (20.8%), while Pfizer led the pack with a 28.1% operating profit margin. But Lilly still has one more card to play that could lift it above the competition.

That would be Sola, Lilly's experimental Alzheimer's drug, which Goldman Sachs calls a "potential blockbuster." The analyst only gives Sola about a 35% "probability of success." But if the drug works as promised, and the FDA approves it, Goldman says that single drug could add a further $7.5 billion in peak sales for Lilly, "and super charge LLY's earnings profile."

Bonus thing: Goldman Sachs' record

With Eli Lilly stock selling for 34.5 times earnings today, Goldman Sachs' recommendation to buy the stock is not without risk. Currently, Merck stock costs 34.1 times earnings, and Pfizer less than 30, so Goldman is urging us to buy a stock with less revenue, and lower profit margins, than its rivals -- and pay a higher P/E ratio in the process.

That sounds dangerous. On the other hand, we've been tracking Goldman's record on Motley Fool CAPS for well over a decade now, and according to our data, Goldman is actually pretty good at picking winners in big pharma. The past decade has seen Goldman's pharmaceuticals picks outperform the market by a combined 448 percentage points. 58% of the time, when Goldman says a stock will beat the market, that's precisely what it does.

While that doesn't necessarily mean Goldman will be right this time, the potential is certainly there.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.