Eli Lilly (LLY 1.19%) has been on a tear this past year, rising up to become the most valuable healthcare stock in the world. It soared past UnitedHealth Group and other top healthcare companies in 2023. Its market cap even pushed past electric vehicle maker Tesla this year. This Indianapolis-based healthcare company has firmly established itself as one of the best and brightest growth stocks around.
Let's look at what has investors so excited about this stock, whether investors should worry about its rising valuation, and if this stock has what it takes to help make shareholders a millionaire.
Eli Lilly's growth opportunities are massive and continuing to expand
What makes Eli Lilly attractive as a long-term investment is the sheer potential the company has to get bigger. That's a key ingredient for a stock rising in value -- it needs to have a lot of room to run.
Lilly has a diverse mix of products in its portfolio. The biggest ones are Mounjaro (diabetes) and Zepbound (weight loss); together, they could generate tens of billions of dollars in revenue. And their potential could increase as researchers uncover more ways that they can help patients.
In a recent phase 2 trial, for example, tirzepatide, the active ingredient in both drugs, was shown to be an effective treatment for fatty liver disease. If tirzepatide is approved for more indications, it may generate even more revenue for the business in the long run.
Eli Lilly also has another exciting opportunity in treating early Alzheimer's with donanemab, a drug which could obtain approval from regulators sometime this year. That could easily be another blockbuster drug for the business, generating billions of dollars in revenue. In clinical trials, donanemab showed that it could be more effective than Biogen's Leqembi, an Alzheimer's treatment that regulators have already approved.
This year, the healthcare company expects to generate over $40.4 billion in revenue, which would be at least 18% higher than the $34.1 billion it reported in 2023, a year in which its top line jumped by 20%. And Lilly could still be scratching the surface in terms of long-term potential.
The stock's valuation may not be a big impediment
The biggest reason to think twice about investing in Eli Lilly right now comes back to its valuation. Its market cap is north of $700 billion, and the stock trades at 131 times its trailing earnings. In just the past 12 months, shares have risen by 127% and it's hit new all-time highs.
Investors shouldn't ignore valuation when evaluating stocks. But given the massive growth Lilly may generate in the years ahead, the stock's price may still be justifiable. After all, if the business' profits are likely to double or triple, there's little reason to worry about the stock's current valuation.
Can Eli Lilly stock help make you a millionaire?
The sky looks to be the limit for Eli Lilly right now. It seems to be on track to become the first healthcare stock to hit a $1 trillion valuation; it's just a matter of when that will happen. In the long run, as the business expands and generates significant revenue and profits from its new products, there could be even more upside for investors.
The stock's high valuation could limit gains in the short term. But as long as you're willing to hang on to shares for years, this certainly has the potential to be an investment that can help you become a millionaire.
