Pharma behemoth Eli Lilly (NYSE:LLY) posted better-than-expected fourth-quarter results ahead of the opening bell this morning. Specifically, the drugmaker topped Factset's consensus revenue estimate for the three-month period by a healthy 3.38% and Wall Street's non-GAAP earnings-per-share forecast by a striking 13.8%. Those are exceptional quarterly results by any measure. 

Nonetheless, Lilly's shares don't come across as a screaming buy, despite the company's industry-leading levels of top- and bottom-line growth in the most recent quarter. Here's why investors may want to stick to the sidelines with this blue-chip pharmaceutical stock right now.

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Lilly's Q4 results are good -- but not that good

Admittedly, Lilly's 8% year-over-year revenue growth in Q4 will likely take first place within the realm of big pharma once the smoke clears. Even AstraZeneca (NASDAQ:AZN) and its supercharged portfolio of red-hot diabetes, oncology, and respiratory medicines isn't expected to hit such lofty heights when the drugmaker reports its latest financial results next month.

But the fact of the matter is that Lilly's valuation may have already reached untenable levels following the company's meteoric rise during the tail end of 2019 and early days of 2020. At 20.7 next year's projected earnings, Lilly's stock is now the second most expensive among all large-cap pharmas right now. The only drugmaker with a richer valuation, in fact, is Astra at 24 times forward-looking earnings.

What's more, Lilly and Astra are both trading at nearly twice the prevailing average for their big pharma peer group. The market is clearly expecting big things from these two names in the near future. Unfortunately, Lilly may not be able to deliver the hyper revenue growth needed to justify such a pricey valuation.

Lilly's value proposition centers mainly around the forthcoming approval of new cancer meds like selpercatinib, the recent acquisition of the dermatology company Dermira, and a spate of future midsize acquisitions. While this strategy certainly has its merits, Lilly's aggressive business development activity could easily turn into a huge mistake.

Most acquisitions in this space, after all, fail to justify their enormous price tags at the end of the day. That's a key reason more frugal companies like Biogen have largely shied away from bolt-on acquisitions. The most potent value creators in biopharma tend to come from internally discovered candidates or products in-licensed during early stages of development (preclinical or immediately after a successful proof-of-concept trial). The point is that Lilly's ongoing M&A bonanza is arguably a far riskier endeavor than the market seems to realize.  

Should investors take profits?

Over the past five years, Lilly has returned a whopping 124% to investors (including dividends and assuming a dividend reinvestment plan). That is an extraordinary level of performance for any large-cap stock, much less a top biopharma that has had to contend with a wave of patent expirations. But all good things come to an end.

Lilly's shares now appear to be trading mainly on speculation about the company's future acquisitions and management's ability to maximize their value. That's not a solid set of reasons to own any stock. It may indeed be time to consider taking profits on this high-flying pharma stock.  

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.