Eli Lilly (LLY 0.24%) has been a growth beast over the years and is now easily the most valuable healthcare company in the world, with a market cap of more than $650 billion. But there's still much more growth on the horizon for the business in the years ahead.
Although as of this week the stock has declined by more than 4% since the start of the year, there's little reason to believe that its shares have peaked. Eli Lilly is the most likely healthcare stock to reach a $1 trillion valuation, and I believe it could hit that plateau by 2027.
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A big catalyst could be coming soon
Eli Lilly's stock has surged close to 400% in five years. But for it to get going again and start rallying, it'll likely need a catalyst and a reason for growth investors to rally around its business. The good news is that it may not be too long before that happens.
A big reason for the company's growth is the hype and excitement surrounding its GLP-1 treatments, Zepbound (approved for weight loss) and Mounjaro (approved for diabetes). These blockbuster drugs have been generating billions in revenue and have bolstered the company's growth rate in recent quarters.
The drug that you should keep an eye on moving forward, however, is orforglipron. Unlike Zepbound and Mounjaro, which are injections, orforglipron is a pill that can be a more attractive option for patients looking to lose weight or to bring down their glucose levels. Eli Lilly expects that the drug could obtain approval from regulators by as early as next year. Clinical trials thus far have been encouraging, with the drug showing it can help people lose around 15% of their body weight.
The company is also working on another injectable treatment, retatrutide, which has the potential to be its best weight loss treatment yet. In a recent clinical trial, patients using the drug lost more than 24% of their body weight.
With not one but two exciting weight loss drugs that may potentially obtain approval in the near future, it may not be too long before this healthcare stock gets going again.
The stock isn't looking all that expensive
It wasn't all that long ago that Eli Lilly's stock looked incredibly expensive, trading at well over 100 times its trailing earnings. But as the stock has fallen this year and as its earnings have grown, its valuation has become much more attractive. While its price-to-earnings (P/E) multiple is still significant at 60, based on analyst estimates, its forward P/E multiple is just 34.
And when you look at its price-to-earnings growth (PEG) ratio, which sits at around 1.1, that suggests the stock may even be cheap given the future growth the business may experience. For PEG, anything below 1 indicates great value for growth investors. However, Eli Lilly is arguably worth a premium, which is why I don't think these multiples will stay as low as they are for long.
The overall healthcare sector has been struggling this year. The Health Care Select Sector SPDR Fund has declined by more than 3% since January. The market appears to be concerned over healthcare spending cuts and how they may affect stocks across the entire sector. But for Eli Lilly, one of the top healthcare companies in the world -- which grew its sales by 32% last year to $45 billion and still looks unstoppable -- the stock should be doing much better than it is.
Eli Lilly stock is a no-brainer buy right now
For Eli Lilly to reach a $1 trillion market cap within the next couple of years, it would need to rise by more than 50% from where it is today. I think that's possible as its earnings continue to grow, and especially if you factor in that it's underperforming this year and that there could be multiple approvals coming its way in the not-too-distant future.
This is a top growth stock to own, and now that its valuation has come down, it could be a remarkable investment to load up on.
