We believe that abbv stock (NYSE: ABBV) is a better pick than its industry peers, Eli Lilly Stock (NYSE: LLY). LLY stock trades at high valuation 14.6x trailing revenue, compared to just 4.2x for ABV
1. AbbVie’s revenue growth is better
- AbbVie’s revenue growth has been much better, a 21.2% Compared to the average annual growth rate in the last three years 8.7% for Eli Lilly.
- AbbVie’s Revenue Growth Has Been Buoyed By Its Allergen
Acquisition in 2020.
- The company is best known for its blockbuster drug — Humira — used to treat rheumatoid arthritis and Crohn’s disease, among others. Humira projects $21.2 billion in 2022 sales, representing 3% year-over-year growth. Now Humira’s biosimilar has already reached the European and US markets, which is affecting the company’s sales.
- Eli Lilly’s revenue growth was driven by continued market share gains for drugs such as Trulicity, Vergenio, Jardiance and its COVID-19 antibody. The company has also secured US FDA approval for its diabetes drug – tirzepatide – which is expected to exceed $5 billion in peak sales.
- Even if we look at the last twelve months period, AbbVie has fared better with sales growth 4.4% Vs -5.6% for Eli Lilly. However, the decline for Eli Lilly is mainly attributed to lower sales for its COVID-19 antibody.
- Our ABV Revenue Comparison And Eli Lilly Revenue Comparison Dashboards provide more information about the sales of the companies.
- Looking to the future, more Humira biosimilars are expected to enter the US this year, which could result in a steep decline in sales of the drug in the coming years.
- That said, AbbVie looks set to counter this biosimilar impact in 2020 with its Allergan acquisition, which gives it access to Botox, a multibillion-dollar product. In addition, its relatively new drugs — Skirzy and Rinwok — used to treat plaque psoriasis and rheumatoid arthritis, are gaining market share. For perspective, these three products are projected to generate $13.0 billion in 2022, representing nearly 40% year-over-year growth.
- Eli Lilly, in contrast, has no near-term risk associated with biosimilars. It has a strong product cycle, including an Alzheimer’s treatment – donenumab – one of the most anticipated drugs, with peak sales estimated at $10 billion.
- Overall, 2023 will be a painful year for AbbVie, with declining sales due to its Humira biosimilar, but it’s expected to gain market share from 2024 with its relatively new drugs.
2. ABV is more profitable
- AbbVie’s operating margin has declined 39% in 2019 31.2% in 2022, while Eli Lilly’s operating margin 21.8% To 25.3% During this period.
- Looking back over the trailing 12-month period, AbbVie’s operating margin 31.6% fare better than 22.7% for Eli Lilly.
- AbbVie’s 2019 operating margin of 39% was higher due to other income of $890 million recorded in the financials.
- Our ABV Operating Earnings Comparison And Eli Lilly Operating Income Comparison The dashboard contains more details.
- AbbVie’s Free Cash Flow Margin 43.4% is higher than 22.7% for Eli Lilly.
- Given the financial risk Eli Lilly does better with 4.7% Debt as a percentage of equity less than 32.8% for ABV, and its 6.9% cash as a percentage of assets over 4.9% For the latter, that means Eli Lilly has a better debt position and a greater cash cushion.
3. The Net of It All
- We see that AbbVie has demonstrated better revenue growth, is more profitable, and is trading at a comparatively lower valuation multiple. Eli Lilly, on the other hand, has a better debt position and cash cushion.
- Now, looking at the prospects, using P/S as a basis, we believe AbbVie is the better of the two, primarily due to higher volatility in P/E and P/EBIT. Because of its low valuation. It appears that investors have already priced in Humira’s biosimilar risks.
- AbbVie is performing better if we compare the current valuation multiples to the historical average its shares are currently trading at. 4.3x Past Revenue vs Average of last five years 5.3x. In contrast, Eli Lilly stock trades 14.2x Past Revenue vs Average of last five years 8.3x,
- Just as AbbVie’s concerns seem to be priced in, Eli Lilly’s strong pipeline potential seems to be priced in by investors.
- Our ABV Valuation Ratio Comparison And Eli Lilly Valuation Ratio Comparison There are more details.
While ABBV may outperform LLY over the next three years, it’s useful to see how partner of AbbVie Hire on metrics that matter. You’ll find other valuable comparisons for companies from different industries here peer comparison,
Furthermore, the COVID-19 crisis has created several pricing anomalies that could provide lucrative trading opportunities. For example, you’d be surprised how counter-intuitive stock valuations are. Amedisys vs Amerco,
LLY has seen a 16% increase this year, despite high inflation and interest rate hikes by the Fed. But can it go downhill from here? Compare the declines in previous market crashes to see how far Eli Lilly stock can go. Here is the performance summary of all the stocks in the past market crashes.
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