1 Growth Stock That Could Turn $1,000 Into $2,500 by 2030

Growth stocks are back in style after getting hammered in 2022, and many investors are rushing to buy shares of recovering growth-oriented companies. But why not go for one that never went out of style in the first place? That's the case with Eli Lilly (LLY -0.03%), one of the best-performing biotech giants in recent years. After crushing the market over the past year, Eli Lilly has what it takes to do it all over again. Here's why the company could turn an initial investment of $1,000 into $2,500 by 2030 -- a compound annual growth rate (CAGR) of nearly 16%. 

A rapidly growing core therapeutic area

Eli Lilly is primarily known for its work in diabetes and obesity care, areas with severe and growing needs. Obesity is a worsening global health crisis. According to some projections, the demand for medicines that address these conditions will skyrocket through the end of the decade and beyond. Analysts at J.P. Morgan recently projected that the market for obesity drugs could reach as much as $100 billion by 2030 -- up from just $2.9 billion last year

Eli Lilly and its biggest competitor in this field, Novo Nordisk, should be the biggest winners. Estimates tend to vary; some may think those for the obesity drug market sound like a pipe dream. However, early evidence strongly supports the claim that this market will skyrocket. Eli Lilly earned approval for Mounjaro, a diabetes medicine, last year. Mounjaro isn't yet indicated as a weight loss medicine. 

But doctors are already prescribing it off-label to treat obesity. Despite being on the market for just over a year, Mounjaro generated nearly $1 billion in sales in the second quarter. Not yet convinced? Consider Novo Nordisk's Wegovy, which is indicated for weight loss. Demand has been so strong that Novo Nordisk has been struggling to keep up.

Its sales in the first half of 2022 jumped 367% year over year to 12.1 billion Danish kroner ($1.7 billion). Once Mounjaro officially wins approval as a weight loss therapy, its sales growth should accelerate. Getting the nod from regulators should be a mere formality: Mounjaro aced several late-stage clinical trials in treating obesity. Sales growth through 2030 should remain solid for this medicine and help catapult Eli Lilly's top and bottom lines to new heights. 

There are more gems in the pipeline 

Eli Lilly isn't just a diabetes-focused company. The biotech boasts several exciting therapies and candidates in other areas. Arguably the most promising is donanemab, which is currently being evaluated by the U.S. Food and Drug Administration (FDA) in treating Alzheimer's disease (AD). Developing AD medicines has been a serious challenge over the past couple of decades. The overwhelming majority of candidates never made it on the market.

However, this is another area with a large and growing need. There are 6 million Americans with AD today -- a number that will expand along with the country's (and the world's) aging population. Donanemab delivered excellent results in a late-stage trial. A recent report from the research company Evaluate Pharma puts it as the fourth-most valuable research and development project in the industry, with projected annual sales of $2.1 billion by 2028.

The sky is the limit 

In the second quarter, Eli Lilly's revenue of $8.3 billion soared by 28% year over year. Perhaps that doesn't tell the whole story. The company did benefit from a surge in cases of COVID-19 as it sold more of its coronavirus antibodies. But even without its coronavirus products and Baqsimi, a diabetes treatment it agreed to divest earlier this year, Eli Lilly's revenue increased by 22% year over year, largely thanks to Mounjaro.

Over the next six years, Eli Lilly's top line should grow much faster than the average for the biotech industry. Keep in mind that for drugmakers of this size, year-over-year revenue growth in the high single digits is usually considered good. But analysts see Eli Lilly's profits growing at an average of 24.8% per year for the next five years. That's exceptional. Further, the company's solid dividend should boost returns for those who opt to reinvest them. Eli Lilly has doubled its payouts in the past five years.

Considering these developments, Eli Lilly's market cap could well grow 16% per annum from now through 2030, turning an initial investment of $1,000 into $2,500 by then.