At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.

But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

And speaking of the best ...
Is it time to buy shares of Eli Lilly (NYSE: LLY)? Earlier this week, my Foolish colleague Brian Orelli examined the question and gave unequivocal (but politely expressed) advice: Don't do it. One day later, we've seen a major Wall Street investment house look at the same facts, and come to the same conclusion, as Soleil Securities downgraded Lilly shares to "sell."

Why all the pessimism? After all, with a trailing P/E of less than 9, way, way below its long-term average of 28, Lilly looks for all the world like a screaming value stock. It's cheaper than Johnson & Johnson (NYSE: JNJ) at 12.4, cheaper than sanofi-aventis (NYSE: SNY) at 11.7, and even cheaper than GlaxoSmithKline's (NYSE: GSK) low, low price of 10 times earnings. (In fact, in the world of Big Pharma, about the only company you'll find selling for a significantly lower P/E than Lilly is Bristol-Myers Squibb (NYSE: BMY), whose shares fetch just 4.5 times earnings.)

Look ahead a little further, and Lilly's shares get cheaper still. According to the consensus of analysts who track the stock, Lilly sells for a mere 7.6 times next year's earnings. Meanwhile, the stock is paying a dividend unmatched in the Big Pharma space -- an incredible 5.8%. So why not buy it?

Watch the second step. It's a doozy
At the risk of mixing a metaphor, the answer is: Because the bloom's about to come off Lilly's rose. Soleil warns of an impending "significant upcoming patent cliff that coupled with a lack of meaningful replacement products will place downward pressure on revenues and EPS for the next five years." Check out the analysts' earnings forecasts, and you'll notice that this year's news is about as good as it gets for Lilly. By 2011, earnings are predicted to flatline, then fall steeply in 2012, and collapse even further in 2014.

Long term, analysts are looking for an average decrease in earnings of about 4% per year over the next five years. That's not usually what you look for in an investment -- a company that earns less and less as time goes by. And yet ... I cannot help but wonder if Soleil's looking too hard for thorns on the Lilly, and ignoring the sweet smell of value.

Let's go to the tape
I mean, it's not as if Soleil has a great record of calling things right in the pharma space. While one of the best-ranked analysts we track here on CAPS overall, Soleil has relied heavily on its expertise in the media and retail industries for its success. In contrast, this banker has gotten only 40% of its pharmaceuticals predictions correct historically, and it has been wrong as often as it's been right in biotech. Might it not be wrong about Lilly as well?

Objection, your honor!
All right. That's a leading question -- but here's why I think it's appropriate. Consider: As Brian pointed out in his Lilly article earlier this week, the company's got a lot of drugs coming off-patent in the near future, with precious little "new blood" to replace 'em quickly. Only eight of the company's drug candidates are currently in Phase 3 trials. Further down the line, however, Brian tells us that, "Lilly had 68 compounds in different stages of clinical development" as of April. Sure, most of these will take years to bring to market. Many of them will never reach market, as they fail to produce hoped-for results, and fall by the wayside. But some of them likely will.

So I ask you: What are the chances that, given several years to work with, a pile of 68 prospects, and more prospects coming down the pipe every year, Lilly won't find at least a couple of blockbuster drugs to build on? Or even if it doesn't, what are the chances that, given several years to mull things over, Lilly's management won't figure out another "out" to maximize value for its shareholders?

Foolish final thought
This is hardly the only company in Big Pharma facing a patent cliff, after all. Worries over skimpy pipelines have already sparked merger mania at Pfizer (NYSE: PFE) and Merck (NYSE: MRK). As one of the smaller market-capped players in the industry, I cannot help but think that Lilly and its 68-drug pipeline might look attractive to a larger player looking to beef up its own pipeline ... with Lilly's prospects. Even if the company doesn't thrive as an independent, going concern, there's every possibility that it can still reward shareholders with a buyout premium.

I think that Lilly may look a little wilted today, but don't sell it short. This stock could yet prove to be a perennial. 

Pfizer is a Motley Fool Inside Value selection. Johnson & Johnson is an Income Investor pick and Motley Fool Options has recommended buying calls on the stock. The Fool owns shares of GlaxoSmithKline.

Fool contributor Rich Smith has no position in any of the stocks named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 440 out of more than 165,000 members. The Motley Fool has a disclosure policy.