Intrinsic value of Eli Lilly - LLY

Previous Close

$86.71

  Intrinsic Value

$98.13

stock screener

  Rating & Target

hold

+13%

Previous close

$86.71

 
Intrinsic value

$98.13

 
Up/down potential

+13%

 
Rating

hold

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of LLY stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 95.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.33
  7.80
  7.52
  7.27
  7.04
  6.84
  6.65
  6.49
  6.34
  6.21
  6.08
  5.98
  5.88
  5.79
  5.71
  5.64
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
  5.13
Revenue, $m
  21,222
  22,877
  24,598
  26,385
  28,243
  30,174
  32,182
  34,270
  36,442
  38,704
  41,059
  43,513
  46,071
  48,738
  51,522
  54,428
  57,463
  60,635
  63,950
  67,416
  71,042
  74,836
  78,807
  82,964
  87,318
  91,879
  96,658
  101,666
  106,915
  112,417
  118,186
Variable operating expenses, $m
 
  5,894
  6,308
  6,737
  7,184
  7,648
  8,130
  8,632
  9,154
  9,697
  10,263
  10,455
  11,070
  11,711
  12,380
  13,078
  13,807
  14,569
  15,366
  16,199
  17,070
  17,981
  18,936
  19,935
  20,981
  22,077
  23,225
  24,428
  25,689
  27,011
  28,398
Fixed operating expenses, $m
 
  12,889
  13,212
  13,542
  13,880
  14,227
  14,583
  14,948
  15,321
  15,704
  16,097
  16,499
  16,912
  17,335
  17,768
  18,212
  18,668
  19,134
  19,613
  20,103
  20,606
  21,121
  21,649
  22,190
  22,745
  23,313
  23,896
  24,494
  25,106
  25,734
  26,377
Total operating expenses, $m
  17,763
  18,783
  19,520
  20,279
  21,064
  21,875
  22,713
  23,580
  24,475
  25,401
  26,360
  26,954
  27,982
  29,046
  30,148
  31,290
  32,475
  33,703
  34,979
  36,302
  37,676
  39,102
  40,585
  42,125
  43,726
  45,390
  47,121
  48,922
  50,795
  52,745
  54,775
Operating income, $m
  3,459
  4,094
  5,078
  6,106
  7,179
  8,299
  9,469
  10,691
  11,967
  13,302
  14,699
  16,558
  18,089
  19,693
  21,374
  23,138
  24,989
  26,931
  28,971
  31,114
  33,366
  35,733
  38,222
  40,840
  43,593
  46,489
  49,537
  52,744
  56,119
  59,672
  63,412
EBITDA, $m
  4,956
  5,718
  6,795
  7,919
  9,091
  10,315
  11,592
  12,926
  14,319
  15,775
  17,298
  18,891
  20,559
  22,307
  24,137
  26,057
  28,070
  30,183
  32,401
  34,730
  37,176
  39,747
  42,449
  45,289
  48,276
  51,417
  54,721
  58,196
  61,853
  65,701
  69,750
Interest expense (income), $m
  146
  293
  355
  420
  487
  558
  630
  706
  785
  867
  952
  1,041
  1,133
  1,230
  1,330
  1,435
  1,545
  1,659
  1,779
  1,904
  2,034
  2,171
  2,314
  2,464
  2,621
  2,785
  2,957
  3,137
  3,326
  3,523
  3,731
Earnings before tax, $m
  3,374
  3,801
  4,723
  5,686
  6,692
  7,742
  8,839
  9,985
  11,183
  12,436
  13,747
  15,517
  16,956
  18,463
  20,044
  21,703
  23,444
  25,272
  27,192
  29,211
  31,332
  33,562
  35,908
  38,376
  40,972
  43,705
  46,580
  49,607
  52,794
  56,149
  59,681
Tax expense, $m
  636
  1,026
  1,275
  1,535
  1,807
  2,090
  2,386
  2,696
  3,019
  3,358
  3,712
  4,190
  4,578
  4,985
  5,412
  5,860
  6,330
  6,823
  7,342
  7,887
  8,460
  9,062
  9,695
  10,362
  11,063
  11,800
  12,577
  13,394
  14,254
  15,160
  16,114
Net income, $m
  2,738
  2,775
  3,448
  4,151
  4,885
  5,651
  6,452
  7,289
  8,163
  9,078
  10,035
  11,328
  12,378
  13,478
  14,632
  15,843
  17,114
  18,449
  19,851
  21,324
  22,872
  24,501
  26,213
  28,014
  29,910
  31,904
  34,004
  36,213
  38,539
  40,988
  43,567

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6,039
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  38,806
  35,305
  37,959
  40,718
  43,585
  46,565
  49,663
  52,886
  56,238
  59,728
  63,362
  67,149
  71,096
  75,214
  79,509
  83,994
  88,678
  93,572
  98,688
  104,037
  109,632
  115,487
  121,615
  128,031
  134,751
  141,789
  149,164
  156,892
  164,992
  173,483
  182,386
Adjusted assets (=assets-cash), $m
  32,767
  35,305
  37,959
  40,718
  43,585
  46,565
  49,663
  52,886
  56,238
  59,728
  63,362
  67,149
  71,096
  75,214
  79,509
  83,994
  88,678
  93,572
  98,688
  104,037
  109,632
  115,487
  121,615
  128,031
  134,751
  141,789
  149,164
  156,892
  164,992
  173,483
  182,386
Revenue / Adjusted assets
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
Average production assets, $m
  12,850
  13,864
  14,906
  15,990
  17,115
  18,286
  19,502
  20,768
  22,084
  23,454
  24,882
  26,369
  27,919
  29,535
  31,222
  32,984
  34,823
  36,745
  38,754
  40,854
  43,051
  45,350
  47,757
  50,276
  52,915
  55,679
  58,575
  61,609
  64,790
  68,125
  71,621
Working capital, $m
  4,114
  23
  25
  26
  28
  30
  32
  34
  36
  39
  41
  44
  46
  49
  52
  54
  57
  61
  64
  67
  71
  75
  79
  83
  87
  92
  97
  102
  107
  112
  118
Total debt, $m
  10,305
  10,150
  12,003
  13,928
  15,930
  18,010
  20,172
  22,421
  24,761
  27,197
  29,734
  32,377
  35,132
  38,006
  41,005
  44,135
  47,404
  50,820
  54,391
  58,125
  62,030
  66,117
  70,394
  74,873
  79,563
  84,476
  89,623
  95,017
  100,671
  106,598
  112,812
Total liabilities, $m
  24,798
  24,643
  26,496
  28,421
  30,423
  32,503
  34,665
  36,914
  39,254
  41,690
  44,227
  46,870
  49,625
  52,499
  55,498
  58,628
  61,897
  65,313
  68,884
  72,618
  76,523
  80,610
  84,887
  89,366
  94,056
  98,969
  104,116
  109,510
  115,164
  121,091
  127,305
Total equity, $m
  14,008
  10,662
  11,464
  12,297
  13,163
  14,063
  14,998
  15,971
  16,984
  18,038
  19,135
  20,279
  21,471
  22,714
  24,012
  25,366
  26,781
  28,259
  29,804
  31,419
  33,109
  34,877
  36,728
  38,665
  40,695
  42,820
  45,047
  47,381
  49,827
  52,392
  55,081
Total liabilities and equity, $m
  38,806
  35,305
  37,960
  40,718
  43,586
  46,566
  49,663
  52,885
  56,238
  59,728
  63,362
  67,149
  71,096
  75,213
  79,510
  83,994
  88,678
  93,572
  98,688
  104,037
  109,632
  115,487
  121,615
  128,031
  134,751
  141,789
  149,163
  156,891
  164,991
  173,483
  182,386
Debt-to-equity ratio
  0.736
  0.950
  1.050
  1.130
  1.210
  1.280
  1.340
  1.400
  1.460
  1.510
  1.550
  1.600
  1.640
  1.670
  1.710
  1.740
  1.770
  1.800
  1.820
  1.850
  1.870
  1.900
  1.920
  1.940
  1.960
  1.970
  1.990
  2.010
  2.020
  2.030
  2.050
Adjusted equity ratio
  0.283
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,738
  2,775
  3,448
  4,151
  4,885
  5,651
  6,452
  7,289
  8,163
  9,078
  10,035
  11,328
  12,378
  13,478
  14,632
  15,843
  17,114
  18,449
  19,851
  21,324
  22,872
  24,501
  26,213
  28,014
  29,910
  31,904
  34,004
  36,213
  38,539
  40,988
  43,567
Depreciation, amort., depletion, $m
  1,497
  1,624
  1,716
  1,812
  1,912
  2,015
  2,123
  2,235
  2,352
  2,473
  2,599
  2,334
  2,471
  2,614
  2,763
  2,919
  3,082
  3,252
  3,430
  3,615
  3,810
  4,013
  4,226
  4,449
  4,683
  4,927
  5,184
  5,452
  5,734
  6,029
  6,338
Funds from operations, $m
  4,367
  4,399
  5,164
  5,963
  6,797
  7,667
  8,575
  9,524
  10,515
  11,551
  12,634
  13,661
  14,848
  16,092
  17,395
  18,762
  20,196
  21,700
  23,280
  24,939
  26,682
  28,514
  30,439
  32,464
  34,593
  36,832
  39,187
  41,665
  44,273
  47,017
  49,905
Change in working capital, $m
  -484
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
Cash from operations, $m
  4,851
  4,397
  5,163
  5,962
  6,795
  7,665
  8,573
  9,522
  10,513
  11,549
  12,632
  13,659
  14,846
  16,089
  17,392
  18,759
  20,193
  21,697
  23,277
  24,936
  26,679
  28,510
  30,435
  32,460
  34,588
  36,827
  39,182
  41,660
  44,268
  47,012
  49,899
Maintenance CAPEX, $m
  0
  -1,137
  -1,227
  -1,319
  -1,415
  -1,515
  -1,618
  -1,726
  -1,838
  -1,954
  -2,076
  -2,202
  -2,334
  -2,471
  -2,614
  -2,763
  -2,919
  -3,082
  -3,252
  -3,430
  -3,615
  -3,810
  -4,013
  -4,226
  -4,449
  -4,683
  -4,927
  -5,184
  -5,452
  -5,734
  -6,029
New CAPEX, $m
  -1,092
  -1,014
  -1,043
  -1,083
  -1,126
  -1,170
  -1,217
  -1,265
  -1,317
  -1,370
  -1,427
  -1,487
  -1,550
  -1,617
  -1,687
  -1,761
  -1,839
  -1,922
  -2,009
  -2,101
  -2,197
  -2,299
  -2,406
  -2,520
  -2,639
  -2,764
  -2,896
  -3,035
  -3,181
  -3,334
  -3,496
Cash from investing activities, $m
  -3,139
  -2,151
  -2,270
  -2,402
  -2,541
  -2,685
  -2,835
  -2,991
  -3,155
  -3,324
  -3,503
  -3,689
  -3,884
  -4,088
  -4,301
  -4,524
  -4,758
  -5,004
  -5,261
  -5,531
  -5,812
  -6,109
  -6,419
  -6,746
  -7,088
  -7,447
  -7,823
  -8,219
  -8,633
  -9,068
  -9,525
Free cash flow, $m
  1,712
  2,246
  2,893
  3,559
  4,254
  4,980
  5,738
  6,531
  7,358
  8,224
  9,129
  9,970
  10,962
  12,002
  13,092
  14,235
  15,434
  16,694
  18,016
  19,406
  20,866
  22,401
  24,016
  25,714
  27,500
  29,380
  31,359
  33,442
  35,635
  37,944
  40,374
Issuance/(repayment) of debt, $m
  2,500
  1,782
  1,853
  1,926
  2,001
  2,080
  2,163
  2,249
  2,340
  2,436
  2,537
  2,643
  2,755
  2,874
  2,999
  3,130
  3,269
  3,416
  3,571
  3,734
  3,906
  4,087
  4,277
  4,478
  4,690
  4,913
  5,147
  5,394
  5,654
  5,927
  6,214
Issuance/(repurchase) of shares, $m
  -600
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  1,599
  1,782
  1,853
  1,926
  2,001
  2,080
  2,163
  2,249
  2,340
  2,436
  2,537
  2,643
  2,755
  2,874
  2,999
  3,130
  3,269
  3,416
  3,571
  3,734
  3,906
  4,087
  4,277
  4,478
  4,690
  4,913
  5,147
  5,394
  5,654
  5,927
  6,214
Total cash flow (excl. dividends), $m
  3,075
  4,028
  4,746
  5,485
  6,255
  7,060
  7,901
  8,780
  9,698
  10,660
  11,666
  12,613
  13,717
  14,875
  16,090
  17,365
  18,704
  20,110
  21,587
  23,139
  24,771
  26,488
  28,293
  30,192
  32,190
  34,293
  36,507
  38,836
  41,289
  43,871
  46,589
Retained Cash Flow (-), $m
  563
  -756
  -802
  -833
  -866
  -900
  -936
  -973
  -1,012
  -1,054
  -1,098
  -1,144
  -1,192
  -1,243
  -1,297
  -1,354
  -1,415
  -1,478
  -1,545
  -1,615
  -1,690
  -1,768
  -1,851
  -1,938
  -2,029
  -2,126
  -2,227
  -2,334
  -2,446
  -2,564
  -2,689
Prev. year cash balance distribution, $m
 
  4,102
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  7,374
  3,945
  4,652
  5,390
  6,160
  6,965
  7,807
  8,686
  9,606
  10,569
  11,469
  12,525
  13,632
  14,793
  16,011
  17,289
  18,632
  20,042
  21,524
  23,082
  24,720
  26,442
  28,255
  30,161
  32,168
  34,280
  36,502
  38,843
  41,306
  43,900
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  7,070
  3,611
  4,048
  4,438
  4,775
  5,055
  5,274
  5,429
  5,518
  5,541
  5,447
  5,345
  5,183
  4,966
  4,701
  4,394
  4,054
  3,691
  3,314
  2,933
  2,557
  2,194
  1,852
  1,536
  1,251
  1,000
  783
  601
  451
  331
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Eli Lilly and Company is engaged in drug manufacturing business. The Company discovers, develops, manufactures and markets products in two segments: human pharmaceutical products and animal health products. The Company's human pharmaceutical business segment sells medicines, which are discovered or developed by its scientists. Its animal health business segment operates through the Company's Elanco division, which develops, manufactures and markets products for both food animals and companion animals. The Company's human pharmaceutical products include endocrinology products, neuroscience products, oncology products, immunology products and cardiovascular products. The Company's animal health products segment includes products for food animals and products for companion animals. As of December 31, 2016, the Company manufactured and distributed its products through facilities in the United States, Puerto Rico and 14 other countries.

FINANCIAL RATIOS  of  Eli Lilly (LLY)

Valuation Ratios
P/E Ratio 34.9
Price to Sales 4.5
Price to Book 6.8
Price to Tangible Book
Price to Cash Flow 19.7
Price to Free Cash Flow 25.4
Growth Rates
Sales Growth Rate 6.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -32.8%
Cap. Spend. - 3 Yr. Gr. Rate -0%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 59.7%
Total Debt to Equity 73.6%
Interest Coverage 24
Management Effectiveness
Return On Assets 7.7%
Ret/ On Assets - 3 Yr. Avg. 7.2%
Return On Total Capital 11.7%
Ret/ On T. Cap. - 3 Yr. Avg. 10.8%
Return On Equity 19.2%
Return On Equity - 3 Yr. Avg. 16.6%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 73.4%
Gross Margin - 3 Yr. Avg. 74.3%
EBITDA Margin 23.6%
EBITDA Margin - 3 Yr. Avg. 22.8%
Operating Margin 16.3%
Oper. Margin - 3 Yr. Avg. 14.2%
Pre-Tax Margin 15.9%
Pre-Tax Margin - 3 Yr. Avg. 15.1%
Net Profit Margin 12.9%
Net Profit Margin - 3 Yr. Avg. 12.4%
Effective Tax Rate 18.9%
Eff/ Tax Rate - 3 Yr. Avg. 17.6%
Payout Ratio 78.9%

LLY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LLY stock intrinsic value calculation we used $21222 million for the last fiscal year's total revenue generated by Eli Lilly. The default revenue input number comes from 2016 income statement of Eli Lilly. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our LLY stock valuation model: a) initial revenue growth rate of 7.8% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for LLY is calculated based on our internal credit rating of Eli Lilly, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Eli Lilly.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of LLY stock the variable cost ratio is equal to 25.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $12575 million in the base year in the intrinsic value calculation for LLY stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Eli Lilly.

Corporate tax rate of 27% is the nominal tax rate for Eli Lilly. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the LLY stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for LLY are equal to 60.6%.

Life of production assets of 11.3 years is the average useful life of capital assets used in Eli Lilly operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for LLY is equal to 0.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $14008 million for Eli Lilly - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1101 million for Eli Lilly is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Eli Lilly at the current share price and the inputted number of shares is $95.5 billion.

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COMPANY NEWS

▶ What Analysts Recommend for Eli Lilly in December 2017   [Dec-12-17 10:30AM  Market Realist]
▶ How Is Olumiant Positioned after 3Q17?   [09:00AM  Market Realist]
▶ Eli Lilly raises dividend by 8%   [Dec-11-17 03:38PM  CNBC Videos]
▶ Eli Lilly hikes dividend by 8%   [03:36PM  MarketWatch]
▶ How Has Eli Lillys Cyramza Performed   [07:31AM  Market Realist]
▶ How Is Eli Lillys Taltz Positioned Now?   [10:31AM  Market Realist]
▶ How Eli Lillys Forteo and Jardiance Are Performing   [Dec-07-17 05:50PM  Market Realist]
▶ How Did Eli Lilly Perform in 3Q17?   [02:45PM  Market Realist]
▶ FDA approves diabetes drug that also helps with weight loss   [Dec-05-17 04:35PM  Associated Press]
▶ Understanding Eli Lillys Estimates after 3Q17   [10:31AM  Market Realist]
▶ Jim Cramer Reveals His Top Takeover Targets for 2018   [Nov-30-17 01:38PM  TheStreet.com]
▶ Trump health pick parries questions on drug cost, health law   [Nov-29-17 03:16PM  Associated Press]
▶ Nektar Therapeutics Raised Its Revenue Guidance for 2017   [Nov-28-17 05:15PM  Market Realist]
▶ Inside Eli Lillys Revenue Trends in 3Q17   [03:23PM  Market Realist]
▶ ETFs with exposure to Eli Lilly & Co. : November 27, 2017   [Nov-27-17 02:34PM  Capital Cube]
▶ Whats Johnson & Johnsons Valuation?   [Nov-24-17 01:30PM  Market Realist]
▶ Eli Lilly Bets Big on Insulin-Delivery Devices   [Nov-23-17 11:58PM  The Wall Street Journal]
▶ Dexcom now working with Fitbit to help with diabetes management   [Nov-22-17 04:19PM  Fox Business Videos]
▶ United Therapeutics gets much-needed reprieve with drug patent   [Nov-21-17 01:55PM  American City Business Journals]
▶ Health nominee reaped big earnings from drug industry tenure   [Nov-20-17 03:58PM  Associated Press]
▶ AstraZenecas Valuation after 3Q17 Earnings   [Nov-16-17 11:26AM  Market Realist]
▶ [$$] Two Lawsuits Hit Express Scripts Unit on Pricing   [Nov-15-17 07:22PM  Barrons.com]
▶ [$$] Oh, No, a Pharma Exec   [12:33AM  The Wall Street Journal]
▶ [$$] HHS Nominee Oversaw Big Drug Price Increases at Lilly   [12:32AM  The Wall Street Journal]
▶ [$$] Oh, No, a Pharma Exec   [06:12PM  The Wall Street Journal]
▶ [$$] HHS Nominee Oversaw Big Drug Price Increases at Lilly   [03:15PM  The Wall Street Journal]
▶ Can Marijuana Cure Alzheimer's Disease?   [09:00AM  Motley Fool]
Financial statements of LLY
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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