Postos
26Good evening everyone,
Here are my favorites for the health sector.
Novo Nordisk $NOVO B (-0,7%)
Stryker $SYK (+1,51%)
Intuitive Surgical (P/E ratio 70, P/B ratio 19 🤑) $ISRG (+1,9%)
Astra Zeneca $AZN (+0,12%)
Zoetis $ZTS (+1,03%)
Idexx Lab. $IDXX (-0,71%)
Amgen (profit margin declining) $AMGN (+0,76%)
I would be interested to know what your favorites are for a long-term investment?
I would like to use the current "black time" to structure my portfolio better and diversify it more. So far, I have overweighted some sectors rather arbitrarily, while others are completely absent. 😅
In order to achieve a more sound, sectoral diversification, I have looked at two things:
1. the long-term performance of the sectors in the S&P 500
2. the maximum drawdowns of these sectors over different time periods
----------------------------------------------------------------------------------------------------------
The following table shows the average annual returns of the S&P 500 sectors over 10, 20, 30 and 40 years.
It is striking: Some sectors have performed significantly better than others over longer periods of time. Particularly noteworthy are
- Information technology
- Healthcare
- Consumer staples (cyclical consumption)
These sectors achieved long-term average annual returns of over 10% p.a.
By contrast, the following sectors performed less convincingly:
- Energy
- Materials (basic materials)
- Real estate
----------------------------------------------------------------------------------------------------------
Unfortunately, historical drawdown data by sector is limited and not uniformly available. Nevertheless, a clear trend can be identified: The available data shows that defensive sectors tend to have lower drawdowns, while cyclical sectors are more prone to larger declines. So it looks like sectors such as consumer discretionary and healthcare tend to have lower maximum drawdowns, while sectors such as financials and energy have had the sharpest declines.
In the next step, I looked at the current (2024) market weighting of the sectors in the S&P 500, i.e. a market capitalization-weighted allocation as a passive ETF would reflect it:
Information Technology 28%
Healthcare 13 %
Financial services 12 %
Consumer Discretionary 10%
Communication services 8 %
Industry 8 %
Consumer staples 6 %
Energy 4 %
Utilities 3 %
Materials 2.5 %
Real estate 2.5 %
This is the first time I realize how much you have to overweight or underweight a sector in order to have the greatest probability of hypothetically beating the market in a fictitious, ideal scenario by means of sectoral overweighting and underweighting.
For example, only a weighting of well over 28% in information technology would have led to a possible outperformance.
Conversely, only a complete abandonment of the real estate sector could have made a positive contribution. (in retrospect)
Of course, this is a gross oversimplification, as each sector consists of a large number of companies of very different quality. Nevertheless, valuable insights for the strategic portfolio orientation can be derived from this.
----------------------------------------------------------------------------------------------------------
But now I'm at a crossroads.
Option A
I analyze current valuation ratios such as P/E ratios, Shiller P/E ratios or earnings growth per sector and decide on this basis which sectors appear most attractive for the future, i.e. an active, forward-looking approach.
Option B (my favorite):
I take my cue from long-term, historical average returns and risks and use them as a guide for strategic allocation - in other words, a more rule-based approach with a rational derivation.
----------------------------------------------------------------------------------------------------------
My sectoral target portfolio, based on risk-return profile and personal preference, could look like this:
Let's start from the back, the weakest sectors such as energy, real estate, utilities and basic materials have proven to be underperforming and often volatile over the long term. In total, I would therefore like to limit these to a maximum of 10% of my portfolio.
Industry 8 %
Financial services with 9 %
Communication services 10 %
Consumer staples with 13 %,
Healthcare 15 %
Consumer staples 15%
Information technology 20 %
The above weighting aims to create a portfolio that is both growth-oriented and risk-optimized in the long term.
----------------------------------------------------------------------------------------------------------
Conclusion 🤓
With this train of thought, I am pursuing a systematic and long-term approach that takes both opportunities and risks into account. The aim is to create a portfolio that remains stable and profitable in different market phases. Of course, it will not always be easy to implement these weightings perfectly in practice, but this strategy provides a clear direction as a basis.
----------------------------------------------------------------------------------------------------------
Sources 🤯
JP Morgan Asset Management - Guide to the Markets
www.vanguard.com Principles for Investing Success
The AstraZeneca share $AZN (+0,12%) is currently in a positive state. The pharmaceutical company has published promising results on a new drug for the treatment of breast cancer, Camizestrant. These data come from a phase III trial and show a significant extension of the period without disease progression.
The trial is still ongoing and it is likely to be some time before approval. However, analysts are optimistic and forecast sales of USD 1.5 billion (EUR 1.4 billion) for Camizestrant by 2030.
AstraZeneca even expects peak annual sales of USD 5 billion for the drug, which would be a great success. Group CEO Pascal Soriot recently emphasized that the company's drug pipeline is well on track, which is reflected in sales growth of 18% in 2024 to over USD 54 billion.
AstraZeneca shares rose by 1.5% to £120.32 in London trading. It remains exciting to see how developments will continue! 📈
⬆️⬆️⬆️
- GOLDMAN raises the price target for SIEMENS ENERGY from EUR 56 to EUR 60. Buy. $ENR (+2,01%)
- BARCLAYS raises the target price for MERCEDES-BENZ from EUR 48.50 to EUR 50. Underweight. $MBG (+1,59%)
- JEFFERIES upgrades SMA SOLAR from Hold to Buy and raises target price from EUR 14 to EUR 20. $S92 (+3,11%)
- GOLDMAN raises the price target for DEUTSCHE BÖRSE from EUR 226 to EUR 231. Neutral. $DB1 (+0,76%)
- BOFA upgrades BBVA from Neutral to Buy and raises target price from EUR 11 to EUR 13. $BBVA (+1,15%)
- WARBURG RESEARCH upgrades FUCHS SE from Hold to Buy. Target price EUR 50. $FPE
- GOLDMAN raises the price target for FLATEXDEGIRO from EUR 17 to EUR 18. Buy. $FTK (-1,21%)
- BERENBERG raises the target price for IBERDROLA from EUR 12.30 to EUR 14. Hold. $IBE (+0,69%)
- JEFFERIES upgrades PVA TEPLA from Hold to Buy and raises target price from EUR 12 to EUR 19. $TPE (-0,56%)
- JEFFERIES raises the price target for FRIEDRICH VORWERK from EUR 23 to EUR 30. Hold. $VH2 (+3,59%)
- JEFFERIES raises the price target for ZEAL NETWORK from EUR 45 to EUR 58. Buy. $TIMA (-0,11%)
- JEFFERIES raises the price target for ADESSO from EUR 75 to EUR 85. Hold. $ADN1 (-1,3%)
- JEFFERIES upgrades NEL from Underperform to Hold. Target price NOK 3. $NEL (+0,25%)
⬇️⬇️⬇️
- BERENBERG lowers the price target for RWE from EUR 46.50 to EUR 42. Buy. $RWE (+0,06%)
- GOLDMAN lowers target price for EON from EUR 17.50 to EUR 17. Buy. $EOAN (-0,76%)
- HAUCK AUFHÄUSER IB downgrades AIXTRON from Buy to Hold and lowers target price from EUR 26.40 to EUR 13.80. $AIXA (+0,61%)
- METZLER lowers the price target for DWS from EUR 41 to EUR 40.50. Hold. $DWS (+2,81%)
- GOLDMAN lowers the price target for ASTRAZENECA from GBP 159.55 to GBP 155.58. Buy. $AZN (+0,12%)
- TD COWEN downgrades STMICRO to Hold. Target price EUR 24.50. $STM (+0,98%)
- JPMORGAN downgrades CONSTELLATION BRANDS to Neutral. Target price USD 203. $STZ (-0,91%)
- JEFFERIES lowers the price target for DOCMORRIS from CHF 65 to CHF 39. Buy. $DOCM (-0,32%)
- JEFFERIES lowers the price target for ATOSS SOFTWARE from EUR 112 to EUR 108. Hold. $AOF (-3,42%)
- JEFFERIES lowers the price target for JENOPTIK from EUR 34 to EUR 29. Buy. $JEN (+2,63%)
- JEFFERIES lowers the price target for KONTRON from EUR 29 to EUR 27. Buy. $KTN (+0,18%)
- JEFFERIES lowers the price target for SILTRONIC from EUR 95 to EUR 90. Buy. $WAF (+2,65%)
- JEFFERIES downgrades VERBIO from Buy to Hold and lowers target price from EUR 22 to EUR 11. $VBK (+1,69%)
- JEFFERIES downgrades SGL CARBON from Buy to Hold and lowers target price from EUR 9.50 to EUR 4.40. $SGL (-0,07%)
⬆️⬆️⬆️
- BOFA raises the price target for WALMART from USD 95 to USD 105. Buy. $WMT (-0,63%)
- JEFFERIES raises the price target for WALMART from USD 100 to USD 105. Buy. $WMT (-0,63%)
- HAUCK AUFHÄUSER IB raises the target price for RHEINMETALL from EUR 680 to EUR 750. Buy. $RHM (+0,16%)
- WARBURG RESEARCH raises the target price for RHEINMETALL from EUR 600 to EUR 700. Buy. $RHM (+0,16%)
- JPMORGAN raises the price target for SALESFORCE from USD 310 to USD 340. Overweight. $CRM (+1,45%)
- WARBURG RESEARCH raises the target price for LEG IMMOBILIEN from EUR 81.60 to EUR 90.50. Hold. $LEG (+0,64%)
- DEUTSCHE BANK RESEARCH raises the price target for HEIDELBERG MATERIALS from EUR 116 to EUR 137. Buy. $HEI (+3,61%)
- KEPLER CHEUVREUX raises the price target for GFT TECHNOLOGIES from EUR 31 to EUR 32. Buy. $GFT (+0,22%)
- ODDO BHF raises the target price for TALANX from EUR 76 to EUR 78. Underperform. $TLX (+1,29%)
- KEPLER CHEUVREUX raises the target price for THYSSENKRUPP from EUR 3.70 to EUR 3.80. Hold. $TKA (+2,28%)
⬇️⬇️⬇️
- STIFEL lowers the price target for BAYER from EUR 36 to EUR 28. Hold. $BAYN (+3,54%)
- LBBW downgrades ENI from Buy to Hold and lowers target price from EUR 16.70 to EUR 15. $ENI (+0,46%)
- WARBURG RESEARCH lowers the target price for SFC ENERGY from EUR 29 to EUR 27. Buy. $F3C (-0,86%)
- WARBURG RESEARCH lowers the target price for TECHNOTRANS from EUR 23 to EUR 21. Buy. $TTR1 (+3,01%)
- DEUTSCHE BANK RESEARCH lowers the price target for CUREVAC from USD 3.90 to USD 2.50. Hold. $CVAC (-1,4%)
- BERENBERG lowers the price target for ASTRAZENECA from GBP 150 to GBP 140. Buy. $AZN (+0,12%)
Was die europäischen Aktien am Morgen bewegt 🇪🇺👇🏼
Upside ⬆️
- Evotec $EVT (-0,22%) 20.0% (Halozyme confirms proposal to combine with Evotec for €11.00/shr in €2.0B All-Cash deal)
- TT Electronics $TTG (+0,28%) +38.5% (rejects offers to be acquired)
- Generali $G (+1,5%) +4.5% (9-month results)
- Aegon $AGN +2.5% (Q3 trading update)
- Aviva $AV. (+0%) +0.5% (HSBC raised to buy)
- Touax $TOX +1.0% (earnings)
Downside ⬇️
- ASML Holding $ASML (-0,08%) -2.5% (Applied Materials results)
- Sanofi $SAN (-1,85%) -3.5%, Astrazeneca $AZN (+0,12%) -2.5% (Trump taps vaccine skeptic RFK Jr. to head HHS)
- Bavarian Nordic $BAVA (+1,12%) -17.5% (Q3 results, heavily misses estimates; Trump taps vaccine skeptic RFK Jr. to head HHS)
- Nexans $NEX (+1,98%) -3.5% (Bpifrance confirmed selling 2.5% stake in Nexans)
- Givaudan $GIVN (+0,34%) -1.5% (Barclays cuts to underweight; accident)
- NKT $NKT (+1,69%) -1.5% (Danske Bank raised to buy)
Summary Earnings, 12.11. 👇🏼
$VOD (+1,13%) | Vodafone Q2/H1 24 Earnings
Q2 Service Rev EU7.64B (est EU7.62B)
H1 Oper Profit EU2.38B (est EU2.41B)
Still Sees FY Adj Free Cash Flow At Least EU2.4B
FY25 Guidance Reiterated
$AZN (+0,12%) | AstraZeneca Q3 24 Earnings
Core EPS $2.08 (est $2.06)
Rev. $13.57B (est $13.08B)
Raises FY Core Eps View To High Teens Percentage Growth
To Invest $3.5B In R&D And Manufacturing In The US
Upgrades FY Guidance
$9434 (+0,37%) | SoftBank Q2/H1 Earnings 2024
Q2 SVF Profit 313.14B Yen (est 83.11B Yen)
Q2 Net Income 1.181 Yen (est 294.83B Yen)
Q2 Dividend 22.00 Yen
H1 Net Income 1,011 Yen
H1 Net Sales 3,471 Yen (est 3.42T Yen)
Still FY Dividend 44.00 Yen (est 44.00 Yen)
$BAYN (+3,54%) | Bayer Q3 24 Earnings
Sales EU9.97B (est EU10.15B)
Core EPS EUO.24 (est EU0.31)
Adj. EBITDA EU1.25B (est EU1.33B)
Sees FY Adj. EBITDA EU10.4B To EU10.7B (est EU10.35B)
Now Sees FY Pharma Outlook At Upper End Of Range
Bayer Confirms Sales Growth Outlook
$IFNNY (+2,02%) | Infineon Q4 24 Earnings
Rev, EU3.92B (est EU3.98B)
Total Segment Profit EU832M (est EU792.5M)
Infineon Sees Q1 Revenue About EU3.2B (est EU3.77B)
Sees Q1 Rev. About EU3.2B (est EU3.77B)
2025 Revenue Is Expected To 'Slightly' Decline
$BNR (+4,38%) | Brenntag Q3 24 Earnings:
- Oper EBITA EU281.1M (est EU295.8M)
- Still Sees FY Oper EBITA EU1.1B To EU1.2B
- Cites Challenging Geopolitical, Macroeconomic Operating Conditions
$VBK (+1,69%) | Verbio recorded an operating loss of 6.6 million euros in the first quarter of the financial year due to a weak biofuel market. Group CEO Claus Sauter expects significant increases in earnings in the second half of the year due to possible new legal regulations.
$JUN3 (+1,42%) | Jungheinrich faces a subdued business outlook due to the weak economy and expects sales and incoming orders to be at the lower end of the forecast ranges. In the third quarter, however, the company recorded a 6.5 per cent increase in incoming orders to 1.3 billion euros, while sales declined slightly.
$JEN (+2,63%) | Jenoptik increases its operating result (EBITDA) by 14.9% to 59.1 million euros in the third quarter and confirms its annual targets for 2024 despite an uncertain market environment. Revenue grows by 4.0% to 274.3 million euros, but falls short of expectations
$SIX2 (+1,5%) | Sixt is again lowering its profit forecast for the full year to a pre-tax profit of around EUR 340 million, while analysts had expected an average of EUR 352 million. Despite a ten percent increase in revenue in the third quarter, the negative impact of falling residual values is expected to remain high.
$SFQ (+1,92%) | SAF-Holland is lowering its sales expectations for 2024 from EUR 2 billion to EUR 1.95 billion, but is maintaining its target margin of around ten percent for adjusted EBIT. In the third quarter, the company recorded a decline in sales of over 20 percent and a 63 percent drop in net profit to EUR 9.3 million.
$UTDI (+2,18%) | United Internet reports a slight decline in EBITDA to EUR 978 million in the first nine months due to increased expenses for the 1&1 mobile network. Sales of the 1&1 mobile subsidiary rose by 2.5 percent, but EBITDA fell by nine percent to EUR 463 million, while the sales forecast was lowered.
$IOS (+1,82%) | Ionos increases sales in the first nine months by almost eight percent to over 1.1 billion euros and adjusted EBITDA by nine percent to 334.5 million euros. The company confirms its annual targets and is optimistic about the remaining months of the financial year.
$KWS (+1,01%) | KWS Saat increases net sales by 18 percent to 248.6 million euros in the first quarter and reduces its loss before taxes by 19.4 percent to 37.4 million euros. The company confirms its guidance for fiscal 2024/25 and records extraordinary income of EUR110 million from the sale of its South American corn and sorghum business.
I tidied up my portfolio a bit today. This has partly to do with the fact that I think the stock market is currently running a bit hot, but it's not the decisive factor; it's simply a time when it seems wise to sell some stocks that were no longer at the top of my want list anyway.
First of all, some of you may have noticed that I have switched most of the growth portfolio to ETFs. I've also tidied up a bit there, but it's not worth mentioning.
In the dividend portfolio, I shifted a little more back and forth; although initially I only shifted to the cash portfolio and not yet shifted :D Some of you may remember that I took over some of my grandparents' shares, some of which are also old tax holdings. This is also the case here. But there's no doubt that I also had to pay a lot of tax on the non-old stock. However, I also wanted to tidy up a bit, even though the dividend portfolio was actually intended for buy and hold (forever), so sometimes it turns out that you should perhaps sell after all.
$SBUX (-0,25%) I had started to build up a position at around 85. Then came the Starbucks "crash". This forced me to buy some more. However, the position has become far too large for my dividend portfolio, so I reduced it by a little more than 1/2.
$SAP (+2,08%)
@Karl_ <- Following on from Karl's post. I have a similar view and think that the valuation is no longer really justified. I am also unsure about the German market as a whole at the moment. But after all, SAP also does a lot of business in America. 100% out
$JPM (+0,35%) Perhaps a controversial decision. But I'm not entirely convinced by JPM's return on capital, even for a bank. It is certainly a good investment, but not for me at the moment. But that's more of a gut decision. 100% out
$DHL (-0,46%)
$7974 (+0,99%) were mini positions. Question: Continue to build up or get out? The latter was the answer. I don't see an absolute reason to buy at the moment. 100% liquidated
$JNJ (-0,01%) certainly also a controversial decision. However, I am not convinced by either the performance or the fundamentals. 100% out.
$AZN (+0,12%) Bought Corona for a good reason (vaccination). Now took profits. 100% out.
That's it for now. I now have a cash ratio of almost 50%, which is of course far too much. The cash will flow partly into ETFs in the former growth portfolio and partly into dividend stocks. The main focus will be on consumer staples, industrials and healthcare - if better opportunities arise there. I will gradually build up positions there and post my reasons accordingly.
Edit: I am always grateful for ideas in consumer staples/industrials/healthcare + dividend paying.
As every Sunday, the most important news from the past week, as well as the most important dates for the coming week.
Also as a video:
https://youtube.com/shorts/uWLmaUmA94I?si=Nvgan1ND1bTBDfNJ
Sunday:
Joe Biden resigns and names Kamala Harris as possible successor. Trump has already made a statement. We are curious to see what the markets will do tomorrow. The election campaign in the US seems to be starting all over again.
Monday:
The battery manufacturer $VAR1 Varta is restructuring at the expense of its shareholders. In addition, Porsche and Michael Tojner secure pre-emptive rights for the issue of new shares. As a result of the StaRUG proceedings, small shareholders at Varta in particular are left empty-handed.
https://www.handelsblatt.com/meinung/kommentare/varta-gau-fuer-kleinaktionaere/100054586.html
Tuesday:
$P911 (-0,66%) Porsche corrects its forecast. Turnover is expected to be lower than planned and the margin is also likely to fall. This is probably due to flooding at a European supplier.
Also $ST5 (+1,7%) Steico also fell significantly. Although turnover and profit increased, the share price fell. The reason is a cautious outlook.
Wednesday:
Profit at $TSLA (+10,24%) Tesla falls for the second quarter in a row, Tesla has clearly missed expectations with its figures. Car sales fell by seven percent to 19.9 billion USD. Total sales increased slightly thanks to the strong storage business.
$RHM (+0,16%) Rheinmetall doubled its profit and was even able to exceed expectations. The armaments group is benefiting from numerous orders from the German armed forces. Sales increased by 49% to 2.2 billion euros in the second quarter. Profit doubled to 271 million euros. Rheinmetall is undoubtedly one of the winners of the Ukraine war.
The Purchasing Managers' Index for Germany 🇩🇪 and the USA are disappointing. The value for Germany fell below 50, and the same applies to industry in the USA. The index thus signals a recession. In the USA, at least the service sector remains above the 50 mark.
https://finanzmarktwelt.de/einkaufsmangerindex-juli-316954/?amp
Thursday:
Yesterday, the building materials group $STO3 (+2,96%) Sto reported disappointing figures. Earnings will probably be halved and the targets for 2024 and 2027 have been canceled.
There was also weak news from the automotive industry. $7201 (+2,04%) Nissan's profit collapses by 99%. Opel parent company Stellantnis reports a 40% drop in profits.
Things are also going badly in the luxury goods industry. Gucci's sales shrank by 19%, putting pressure on the profits of its parent company $KER (+0,67%) Kering.
Even consumer goods giant $NESN (-1,74%) Nestlé disappointed with a lowered forecast. Turnover fell by 2.7%, partly due to currency effects.
Even in Poland 🇵🇱, which is otherwise economically spoiled, the supermarket chain $DNP (+1,6%) Dino Polska has to report poor figures. Among other things, profits fell by 28% compared to the previous year.
The situation was different in the pharmaceutical sector. $SAN (-1,85%) Sanofi exceeded analysts' expectations in terms of profit and was able to increase its turnover by 8 %. Also $AZN (+0,12%) Astrazeneca also raised its annual targets. Sales increased by 15 %. However, profits fell slightly due to exchange rate effects.
Good economic data from the USA 🇺🇸. GDP growth in the second quarter was probably significantly stronger than expected (2.8 % annualized, expected: 2.0 %). In addition, inflation is unlikely to exceed expectations.
Friday:
$MBG (+1,59%) Mercedes is able to slightly improve its return on sales again. In addition, there was no profit warning, which many had expected.
BASF $BAS (+1,27%) BASF does not have to lower its forecast, but continues to struggle with rather weak figures. Sales fell by 7%, while adjusted profits of 2 billion euros in the second quarter were roughly at the previous year's level.
Inflation in Japan 🇯🇵 was above expectations. Real interest rate hikes may still have to be made there after all. However, even the price increases for core consumer prices in the capital Tokyo are barely above the BoJ's 2% target.
The German pharmaceutical group $MRK (+2,21%) Merck also delivered strong figures and raised its forecast slightly. Instead of sales of 20.6 - 22.1 billion euros, the range was raised to 20.7 - 22.1 billion euros. Sales stagnated in the second quarter. The reason for the forecast increase is good figures for the cancer drug Xevinapant.
Most important dates in the coming week:
Tuesday: 14:00 Inflation data (Germany)
Wednesday: 05:00 Interest rate decision (BoJ)
Thursday: 13:00 Interest rate decision (BoE)
What we can expect from tomorrow:
Monday:
Tuesday:
Wednesday:
Thursday:
Friday:
Eli Lilly - Analysis 📈 (Reading time approx. 10 minutes)
Hello dear GQ forum,
Over the past few days, I have been taking a closer look at the company Eli Lilly $LLY (+2,83%) as I believe that it could be an exciting buy despite the high share price. 🚀 My analysis compares the quantitative and fundamental financial ratios with those of its competitors. This analysis is less about which drug has how much chance in the future (qualitative analysis), as I have no idea about pharmaceuticals and the like.
The data and the benchmark index (BIEULPVP) are straight from a Bloomberg terminal, so they should be very reliable.
I look forward to your comments and what you think about this stock 🤔
Benchmark index:
Presentation of the company: Eli Lilly
Eli Lilly, founded in 1876 by pharmaceutical chemist and war veteran Colonel Eli, was born out of a need to provide quality pharmaceutical products to the Indianapolis community. Since then, the company has been dedicated to developing effective and safe medicines for the public. Eli Lilly achieved impressive sales in its first year, and its pioneering work in the mass production of pharmaceuticals laid an important foundation for the industry.
A historic milestone was reached with the introduction of insulin in 1920, which changed the lives of diabetics worldwide. The company also played a key role in the mass production of penicillin during the Second World War.
With research and manufacturing facilities in over 55 and 120 countries respectively, Eli Lilly has established a global presence and is able to continually expand its product offering thanks to extensive investment in research and development. The company has made significant advances in various medical fields, including immunology, oncology and diabetes. Of particular note is Eli Lilly's leadership in developing the next generation of insulin treatments and targeted cell therapies in oncology.
Eli Lilly's drug pipeline is characterized by a combination of research, development and strategic acquisitions. Although it is smaller compared to the larger pipelines of pharmaceutical companies such as Novartis, Roche and Pfizer, it still outperforms those of biotech companies specializing in niche markets.
A key measure of success in the pharmaceutical industry is the rate at which drugs progress from the preclinical phase to market approval. Eli Lilly has proven that its pipeline is fertile by successfully developing and launching innovative drugs.
The company, together with Novo Nordisk, has experienced a significant increase in market valuation due to the successful launch of their weight loss drugs. This development positions Eli Lilly and Novo Nordisk as leading players in a new market segment targeting the treatment of obesity, representing a potential annual market volume of over 100 billion dollars.
Like all pharmaceutical companies, Eli Lilly faces challenges such as the risk of clinical trial failures and regulatory hurdles. The probability of approval is particularly low in complex areas such as oncology. Despite these volatile conditions, Eli Lilly remains committed to advancing healthcare through innovation in drug development and strategic partnerships.
Overall, Eli Lilly's history reflects the importance of innovation, strategic growth and a commitment to patient well-being. Through continuous research, development and a focused corporate strategy, Eli Lilly remains at the forefront of pharmaceutical advancement and is a key contributor to improving global healthcare.
Introducing the industry
The pharmaceutical industry is characterized by significant investment in research and development, navigating complex market challenges and adapting to global developments. At the heart of its mission is the goal of addressing unmet medical needs - a task heavily influenced by government regulations, technological advances, intellectual property rights (IP rights) and the trend towards personalized medicine. Companies in this industry are relentlessly deploying large amounts of capital to discover new therapies and drugs, driving this industry forward despite being one of the most highly regulated in the world.
In the USA, the Food and Drug Administration (FDA) is responsible for regulation, while in Europe it is the European Medicines Agency (EMA). The differences in regulations between different regions make it difficult for multinational companies to obtain approvals and marketing rights, especially when they encounter region-specific regulations. Despite major efforts to harmonize international pharmaceutical guidelines, significant differences remain.
The fundamental dynamics of the market, such as the expiry of patents, pricing strategies and entry into new markets, have a decisive influence on the way companies do business. The sector is regularly confronted with patent expiry, which increases the demand for generics and puts pressure on innovators' revenue streams. Generic manufacturers take advantage of such situations to offer low-cost versions of top drugs.
Emerging markets also offer opportunities for growth and expansion, although differences in local regulations and geopolitical instability must be taken into account. When it comes to pricing, it is crucial to strike a balance between the need to recoup the high costs of research and development and offering life-saving treatments at an affordable price. Local governments play a significant role in setting prices and can exert influence both directly and indirectly.
Technologies such as machine learning and artificial intelligence are improving efficiency in drug discovery and patient care. The use of these technologies facilitates the drug discovery process and the conduct of clinical trials.
The advance of biotechnology is also driving the development of personalized medicine, where treatments are tailored to the patient's genetic code, improving treatment efficacy and cure rates.
Collaborations between pharmaceutical companies, public institutions and universities are crucial for success in leading innovation. These partnerships are particularly important in responding to health crises such as pandemics.
Ultimately, the pharmaceutical industry aims to improve overall wellness and combat disease by focusing on gene therapies and personalized medicine to provide more effective treatments that are precisely tailored to patients' individual needs and genetic profiles.
Ratio analysis
Profitability ratios
The data outlines a detailed comparison of various profitability ratios for Eli Lilly versus the Bloomberg industry average (BIEULPVP) from 2019 to 2023. Notably, Eli Lilly's return on common equity (ROCE) significantly exceeds the industry average, demonstrating a robust ability to generate profits from shareholders' equity, despite a decline from an exceptionally high 308.19% in 2019 to 48.24% in 2023. Return on Assets (ROA) and Return on Invested Capital (ROIC) also show that Eli Lilly outperforms industry norms, highlighting its efficiency in utilizing assets and capital to generate profits.
However, while Eli Lilly's Profit Margin and Gross Margin ratios consistently outperform the industry, a decreasing trend is observed, particularly in Profit Margin, from 37.27% in 2019 to 15.36% in 2023. The P/E ratio shows a significant increase, indicating a higher market valuation than earnings over the years. Overall, Eli Lilly demonstrates a strong profitability profile, with figures generally above industry averages, highlighting its operational and financial effectiveness over the period.
Turnover-control ratios
The turnover control ratios for Eli Lilly from 2019 to 2023, compared to industry averages, reveal a good insight into the company's operational efficiency.
The Asset Turnover Ratio shows slightly better efficiency of Eli Lilly in generating revenue from its assets, with a slight increase from 0.87 in 2019 to 0.89 in 2023, compared to an industry average of 0.47. This indicates effective asset utilization.
In contrast, the Fixed Asset Turnover Ratio, how well the company uses fixed assets to generate sales, shows an improvement from 1.31 in 2019 to 1.42 in 2023, but remains below the industry average of 3.72, indicating potential for better utilization of fixed assets.
The Inventory Turnover Ratio shows an initial increase, with a peak of 1.81 in 2021, then a decline to 1.23 by 2023, with an overall average below that of the industry of 2.10. This indicates slower inventory management compared to the industry and highlights an area for operational improvement.
The Collection Period, which represents the time to collect receivables, increased to 24.89 days in 2023, well below the industry average of 68.34 days, indicating that Eli Lilly is collecting payments faster than the industry standard.
The Payables Period shows that Eli Lilly pays its suppliers faster than the industry average, decreasing from 142.44 days in 2019 to 133.94 days in 2023, compared to an industry average of 115.20 days. This could indicate efficient supplier payment processes, but also suggests a potential to optimize cash flow by extending payment terms to improve working capital.
While Eli Lilly demonstrates efficiency in asset and receivables management, there are opportunities to further improve asset utilization and inventory turnover to increase operational effectiveness.
Liquidity ratios
The debt and liquidity ratios for Eli Lilly from 2019 to 2023, compared to industry averages, provide a comprehensive overview of the company's financial structure and liquidity position.
Starting with the assets to equity ratio, which measures the company's leverage and indicates how many of the company's assets are funded by equity, Eli Lilly shows a decreasing trend from 14.56 in 2019 to 5.89 in 2023. This is well above the industry average of 2.78 and indicates that Eli Lilly operates with higher leverage than the industry average.
The debt to assets ratio, which shows the percentage of the company's assets that are financed by debt, has decreased from 93.13% in 2019 to 83.03% in 2023. While this indicates a reduction in reliance on debt, it remains well above the industry average of 26.41%, indicating a higher debt to asset ratio compared to the industry.
The debt to common equity ratio, which indicates the extent to which shareholders' equity can cover outstanding debt, shows a significant reduction from 1355.53% in 2019 to 489.18% in 2023. Despite this improvement, the ratio far exceeds the industry average of 90.40% and reflects a higher financial risk.
The times interest earned ratio, a measure of the company's ability to meet its debt obligations, has improved remarkably from 14.81 in 2019 to 21.25 in 2023 and exceeds the industry average of 8.36. This indicates an improved ability to cover interest expenses.
The current ratio and the acid test (quick ratio) provide insights into the company's short-term liquidity. The current ratio has fluctuated widely and ended at 0.94 in 2023, slightly below the industry average of 1.12, indicating a tighter liquidity position. The acid test ratio, which excludes inventories from current assets, also shows a decrease, ending at 0.42 in 2023 compared to the industry average of 0.66, indicating a more restricted liquidity position when inventories are excluded.
Most recently, the cash (quick) ratio has decreased significantly from 0.21 in 2019 to 0.11 in 2023, well below the industry average of 0.31, indicating a lower capacity to cover short-term liabilities with cash and near-cash assets.
In summary, Eli Lilly's debt and liquidity ratios from 2019 to 2023 indicate a company operating with higher leverage compared to the industry, although it has an improved capacity to cover interest expenses. However, the liquidity measures indicate a tighter liquidity position compared to industry peers, with a notable decline in the ability to meet short-term debt obligations with cash and near-cash assets.
Further ratios (for those who haven't had enough)
Eli Lilly's other ratios from 2019 to 2023, which focus on Tobin's Q, goodwill to total assets and the dividend payout ratio, reveal important insights into the company's market valuation, asset management and dividend policy.
The Tobin's Q ratio, which represents the market valuation relative to the replacement cost of assets, increased significantly from 3.53 in 2019 to 8.99 in 2023, outperforming the industry average of 2.64. This indicates strong investor confidence in Eli Lilly's future growth and profitability.
The percentage of goodwill to total assets, which reflects the impact of acquisitions on asset composition, showed a cautious approach with a slight decrease from 9.37% in 2019 to 7.72% in 2023, below the industry average of 8.27%. This indicates a strategic focus on organic growth and prudent acquisition integration (M&A activity).
Eli Lilly's dividend payout ratio increased from 30.01% in 2019 to 77.66% in 2023, but remained below the industry average of 81.31%. This indicates a strategy of balancing dividend payouts with the retention of earnings for reinvestment and aims at long-term value creation and financial stability.
These metrics underscore Eli Lilly's robust market valuation, prudent asset management and strategic dividend policy and position the company for continued growth and enhanced shareholder value.
Growth estimates
The preference for Compound Annual Growth Rate (CAGR) over Average Annual Growth Rate (AAGR) is crucial in the financial valuation targeting growth rates, mainly due to the distortions caused by outliers such as those caused by the COVID-19 pandemic. By using the CAGR, which calculates geometric growth over a fixed period of time, I achieve a more stable and accurate picture of Eli Lilly's growth, highlighting the company's sustained expansion since 2014. This method effectively eliminates short-term volatility, including major disruptions such as the pandemic, and allows for a clearer differentiation between temporary fluctuations and the company's sustained long-term growth trajectory.
The financial analysis presents Eli Lilly's Compound Annual Growth Rates (CAGRs) and highlights prominent trends in key areas of performance. The CAGR from 2014 to 2023 for the sustainable growth rate is 21.00%, demonstrating the company's capacity to grow without significant increases in debt or equity over the last decade. The CAGR for the return on equity (ROE) of 14.48% illustrates a strong annual increase in profitability from a shareholder perspective. At the same time, the CAGR for Return on Invested Capital (ROIC) of 7.74% shows how efficiently the company has generated profits for all stakeholders from its combined capital.
Eli Lilly's future outlook, based on Bloomberg data, shows that 74.2% of analysts have a Buy rating, reflecting significant market confidence in the short term. The short-term forecasts for 2024 and 2025 indicate a considerable return on equity (ROE) of 73.59% and 69.95% respectively, which points to effective profit generation. Furthermore, analysts forecast a 24.26% increase in revenue from 2024 to 2025, accompanied by even more impressive EBITDA growth of 39.75%, underlining Eli Lilly's strong growth potential and operational efficiency in the near future.
Discussion and interpretation
When evaluating pharmaceutical companies such as Eli Lilly, it is essential to understand that financial ratios alone do not reflect the whole picture. A key qualitative aspect that is not reflected in these metrics is the drug development pipeline, a critical factor for future revenue and growth. While my current analysis does not dive deep into the details of Eli Lilly's pipeline, it is significant that the market views the company's pipeline as material relative to peers, as evidenced by the current share price. The valuation of this pipeline has a significant impact on investor expectations, but is outside the scope of my analysis, which focuses more on financial metrics.
Eli Lilly's financial and operational analysis provides a comprehensive view of the company's position within the pharmaceutical industry, highlighting strengths as well as areas for improvement.
The evaluation of profitability metrics shows that Eli Lilly has a remarkable ability to generate profits from shareholders' equity well above the industry average. However, a declining trend in profit margin and gross margin could indicate potential problems in terms of operational efficiency or cost management. Despite these challenges, an increase in the price/earnings ratio indicates a positive market valuation and increased investor confidence.
The analysis shows that Eli Lilly manages assets and receivables efficiently, but there is room for improvement in the utilization of fixed assets and inventory turnover. Compared to industry standards, the company demonstrates greater efficiency in revenue generation from assets, but lags behind in asset utilization and inventory management. This indicates an opportunity to improve these areas to increase operational efficiency.
Eli Lilly shows higher leverage compared to its peers, which presents both opportunities and risks. While higher leverage can increase return on equity in good times, it also increases financial risk. The company's liquidity ratios, particularly the current ratio and quick ratio, indicate a tighter liquidity position than the industry average and signal challenges in meeting short-term obligations without compromising operational capacity.
Conclusion
The DuPont analysis shows that Eli Lilly achieves excellent results in key areas such as profitability, asset utilization and financial management, regularly outperforming industry averages. However, the company still faces challenges, particularly in operational efficiency related to inventory and asset utilization. In addition, debt levels are higher compared to industry peers, which poses potential financial risks.
For Eli Lilly, it is recommended to improve operational efficiencies, take a more prudent approach to debt management and strengthen liquidity positions to mitigate short-term financial pressures. Addressing these key areas could help Eli Lilly to further strengthen its market position and ensure sustainable growth and financial stability. In addition, the focus should be on more efficient inventory management and better utilization of fixed assets. This would give Eli Lilly the necessary agility and flexibility to react to sudden market changes. Although higher leverage can lead to greater returns, it also carries greater risks. It is crucial to maintain a balance between returns and risks to ensure that the company's progression towards higher shareholder returns is not hampered by financial uncertainty. Maintaining strong liquidity is essential to ensure stability in times of market volatility and to secure investor confidence and the company's continued existence. A commitment to these strategic objectives will strengthen Eli Lilly's competitiveness and further enhance its leadership position in the pharmaceutical industry and in innovation.
This report highlights Eli Lilly's impressive achievements and strategic challenges and emphasizes the importance of financial analysis in making informed strategic decisions. By applying these insights, Eli Lilly can effectively mitigate risks in the global pharmaceutical landscape, take a leadership role in the development of innovative treatments in personalized medicine, and thus make a significant contribution to social well-being.
