Pfizer (PFE 0.02%) and Eli Lilly (LLY +2.20%) are two prominent names in healthcare that have focused on innovation and growing their respective businesses for decades. But in recent years, it's been Eli Lilly that has been the dominant stock to own. Since 2023, it has risen by nearly 200%, while Pfizer has lost nearly half of its value.
While it may be tempting to assume that the pattern will continue, it's also important to consider valuation and other factors that may impact future returns. Past returns are simply a reflection of how a business has done in the past, not how it will do in the years ahead. Below, I'll look at the growth opportunities, financial strength, and valuation of these healthcare stocks to assess which one may be the better buy heading into 2026.
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Which stock has the better growth potential?
Both of these companies have been investing in opportunities that could advance their top and bottom lines in the future.
In Eli Lilly's case, the focus has been primarily around GLP-1 and expanding its manufacturing capabilities. The company recently announced plans to spend $6 billion on a new plant in Alabama, which will help with the production of its weight loss pill, orforglipron. This type of deal can not only be key in expanding Eli Lilly's manufacturing capabilities but also to help avoid potential tariffs by making more of its products in the U.S.
Pfizer has been loading up on acquisitions over the years, which have helped to expand its pipeline. A key one was a $43 billion acquisition of cancer company Seagen that it acquired two years ago. Recently, it announced a much smaller $7 billion deal for Metsera, which has been focusing on obesity treatments. The deal could help Pfizer become a big player in the GLP-1 market after it abandoned its weight loss pill, danuglipron, due to concerning side effects.
While both companies have some exciting growth opportunities, Pfizer's deals could take some time to pay off; there's a clearer path ahead for Eli Lilly, which is why it gets the nod in this category.
NYSE: LLY
Key Data Points
Which stock has the better financials?
Eli Lilly's business has been booming due to soaring demand for its GLP-1 drugs, Zepbound (weight loss) and Mounjaro (diabetes). This year, the company expects its sales to come in at around $63 billion, which would represent a year-over-year increase of 40% from the $45 billion it reported in 2024. The company also generates fantastic profit margins of around 31%, ensuring that as its top line grows, so too will its net income.
Pfizer has been navigating a more challenging path recently as its COVID product sales have been declining. This year, the company anticipates revenue to be around $62 billion, which would be a slight decline from the $63.6 billion it reported last year.
For 2026, Pfizer expects between $59.5 billion and $62.5 billion in revenue. The good news here is that Pfizer's financials remain relatively steady at a time when the company is facing some considerable headwinds. At around 16%, its profit margins aren't as strong as Eli Lilly's, but they are still solid nonetheless.
It's clear that the edge in financial performance goes to Eli Lilly, as not only has it been growing at a much faster rate, but its margins are also far stronger than Pfizer's.
NYSE: PFE
Key Data Points
Which stock has the better valuation?
Investors should be careful never to ignore valuations, because if a stock is doing well but it's also trading at a very high price-to-earnings (P/E) multiple, that can still lead to lackluster returns, since future earnings growth may already be priced in.
Currently, Eli Lilly's stock trades at a P/E multiple of 52, which is considerably higher than the S&P 500 average of just 26. For a fast-growing business such as Eli Lilly, a premium is certainty justifiable, but how much is warranted is the big question.
Pfizer's stock trades at a P/E of only 15. Its lack of growth and the challenges it faces ahead are reflected in its discount. The danger with cheap stocks is that they can be potential value traps if investors don't know what they're getting into.
Overall, I think Pfizer still offers a bit more value for investors. While Eli Lilly is doing well, a P/E multiple of over 50 can set the bar very high for the stock next year.
Which stock should you buy in 2026?
These are two very different stocks. While one is firing on all cylinders, the other is trying to scramble and find a way to get back to growth. And their valuations reflect their respective risks and opportunities.
The stock I'd go with today is Pfizer, simply because it has more bad news priced into its valuation, and there can be more potential upside in the long run. While I'm confident Eli Lilly will still perform well, Pfizer has been making moves over the years to bolster its growth prospects, and it may very well prove to have more upside from here on out, given its lower valuation.
