Yesterday, pharmaceutical giant Eli Lilly & Co. reported its 2019 third-quarter earnings. Despite posting overall sound numbers for the three-month period, the drugmaker's stock still dropped by 2.22% during Wednesday's trading session. Investors were apparently displeased with the quarterly sales figures for the plaque psoriasis medication Taltz, the diabetes drug Trulicity, and the migraine medicine Emgality.

All three drugs generated solid revenue growth during the third quarter, but Wall Street wanted even more from these three key growth products. Lilly, after all, is still navigating its way through a maze of patent expires for top-selling medicines such as Cialis, the overhang from the spinoff of its animal health unit Elanco, and the raging controversy over insulin prices in the U.S., as well as the unexpected marketing withdrawal for its soft tissue cancer drug Lartruvo earlier this year.

A person in a suit holding yellow wooden blocks that spell out the word buy in red capital letters.

Image Source: Getty Images.

Should bargain hunters take advantage of this post-earnings dip? Let's check out how Lilly's stock compares to its biopharma peer group on several key factors.

How does Lilly stack up?

From a surface level, Lilly comes across as a worthwhile buy. The company has a solid clinical pipeline that spans a host of high-value indications, a well-diversified revenue stream -- with Trulicity and Humalog being the only two products that make up over 10% of total sales -- and a modest forward annual yield of 2.35%. Those are all favorable attributes for a big pharma stock.

But the real test is how Lilly compares to the other biopharma titans from a valuation, near-term sales growth, and forward annual dividend yield standpoint. The table below reveals where Lilly stands in relation to its large-cap biopharmaceutical peers on these three key metrics.

Company Forward P/E Projected 2020 Sales Growth Dividend Yield
AbbVie 8.13 6% 5.5%
AstraZeneca 22.7 9.9% 3.2%
Bayer AG 8.86 2.8% 4.35%
Bristol-Myers Squibb 8.76  -- 3.01%
Eli Lilly (NYSE:LLY) 16.3 6.5% 2.35%
Gilead Sciences 9.43 1.5% 3.86%
GlaxoSmithKline  14.2 6.7% 4.41%
Johnson & Johnson 14.2 4.1% 2.94%
Merck & Co. 15.1 5.5% 2.71%
Novartis 15.2 4.6% 3.26%
Pfizer 12.9  -- 3.95%
Sanofi 12.9 5.6% 3.84%
Roche 14.8 2.28% 2.96%
Average 12.35 5.04% 3.56%

Bristol-Myers Squibb and Pfizer's 2020 projected sales were excluded from this comparison because of their ongoing business development plans. Data source: Yahoo! Finance.

What this comparison shows is that Lilly sports a top-shelf valuation, a below-average dividend yield, and an only slightly above-average revenue growth outlook for 2020. So, from a total package standpoint, AbbVie, GlaxoSmithKline, J&J, and Sanofi are all arguably more compelling buys than Lilly right now -- although Glaxo is definitely a borderline case due to its ongoing business development activities that include a planned de-merger and the strong possibility of a dividend reduction in the near future.

Verdict

Over the past five years, Lilly's stock generated the highest total returns on capital within its large-cap biopharma peer group (when including dividends and assuming a dividend reinvestment plan), and it did so by a wide margin. However, the drugmaker's shares have lagged behind its biopharma brethren in a big way this year -- specifically, Lilly's stock has lost investors over 5.6% in 2019, even after accounting for its dividend.

The core issue at play is that investors seem to have gotten a bit too excited about Lilly's slate of new growth products. Starting this year, however, the harsh realities of the hypercompetitive biopharma space have started to become readily apparent, causing the drugmaker's shares to take a step backward. Unfortunately, Lilly's shares appear to have further to fall before they line up with the industry as a whole from a valuation standpoint.

So if you're considering buying Lilly's stock, it might be best to wait a little longer for a more compelling entry point.