The foundation of business quality and long-term value creation
ELI LILLY & Co's top line and bottom line show a clear upward trend through 2024–2025, with revenue rising steadily across the 2025 quarters from $12.73B (2025-03) to $15.56B (2025-06), $17.60B (2025-09) and $19.29B (2025-12). Net income also expanded over 2025, increasing from $2.76B (2025-03) to $5.66B (2025-06), slipping slightly to $5.58B (2025-09), and then reaching $6.64B (2025-12).
Notable inflection points in the series include a net loss of -$57.4M in 2023-09 followed by a sustained recovery, and a large net income increase from $970.3M (2024-09) to $4.41B (2024-12). Revenue crossed the \$11B level in mid‑2024 and continued higher into 2025; both metrics are at the highest levels in the provided series. The most recent quarterly revenue was $19.29B and the most recent quarterly net income was $6.64B.
Why Growth Matters
Consistent revenue and earnings growth are the lifeblood of successful long-term investments. Companies that can grow their top line (revenue) and bottom line (net income) over many years demonstrate they have products or services customers value and are willing to pay for repeatedly.
Revenue Growth shows whether the company is expanding its market reach, gaining market share, or successfully launching new products.Net Income Growth demonstrates the company can convert that revenue into actual profits while managing costs effectively.
Look for steady, sustainable growth rather than erratic spikes. The best businesses compound earnings year after year, creating tremendous value for shareholders over time. Companies that can grow earnings faster than revenue are improving their profitability—a sign of operational excellence and competitive strength.
Year-over-year growth rates for revenue and earnings per share
Reading the Growth Rate Chart
This chart converts the absolute per-share figures into year-over-year percentage changes, making it easy to see whether growth is accelerating, decelerating, or reverting to trend — regardless of the company's absolute size.
Revenue per Share Growth (1-year, split-adjusted) measures how quickly the top line is expanding on a per-share basis. Sustained positive growth signals that the company continues to win customers and grow its addressable market.EPS Diluted Growth (1-year, split-adjusted) measures how quickly earnings are compounding for each shareholder. When EPS growth consistently outpaces revenue growth, operating leverage and margin expansion are at work.
Look for consistency, not just magnitude. A company that reliably grows EPS 10–15% per year is far more valuable than one that alternates between 50% spikes and deep contractions. Negative EPS growth during a period of positive revenue growth is a red flag — costs are rising faster than sales. Quarters where both lines converge near zero or go negative deserve close scrutiny.
How revenue converts to net income for the most recent annual period
Over the period Jan 2025 to Dec 2025, Eli Lilly Co converts approximately 83¢ of every revenue dollar into gross profit (gross margin: 83.0%).After accounting for operating expenses and taxes and expenses, the company retains 31.7% as net profit margin, resulting in $20.64B in net earnings.
Period Information
Report Type: Annual (10-K)
Period: Jan 2025 to Dec 2025
Revenue composition by disclosure category for the latest period
Analyzing long-term margin stability and competitive positioning
ELI LILLY & Co's margins show a clear upward trend over the period shown. Gross margin climbed gradually from the mid‑70s in 2021 to the low‑80s by the end of 2025, while operating margin moved from the low‑50s into the mid‑60s. Net profit margin was more variable—falling into the mid‑teens around late 2023—then recovered through 2024 and 2025, rising sharply in the most recent quarters.
Recent quarters emphasize that momentum: from 2025‑03 to 2025‑12, gross margin rose from 81.7% to 83.0%, operating margin from 63.1% to 66.0%, and net margin from 22.7% to 31.7%. The most recent gross margin was 83.0%, the most recent operating margin was 66.0%, and the most recent net profit margin was 31.7%.
Understanding Profit Margins
Between Jan 2025 and Dec 2025, Eli Lilly Co converts every dollar of revenue through the following stages:
Sustainable competitive advantages reveal themselves through consistently superior profit margins over extended periods. Companies with durable economic moats maintain pricing power and operational efficiency that competitors struggle to match.
A sign of durable competitive advantage is earning sustained higher margins than competitors.Look for margins that remain stable or improve over time, especially during economic downturns. Declining margins may signal increasing competition, pricing pressure, or deteriorating business fundamentals.
Comparing reported earnings to actual cash generation
From 2018 through 2022 ELI LILLY & Co showed operating cash flow that generally tracked with or exceeded net income on a trailing-twelve-month basis, with operating cash flow often ahead by about $0.8–$1.9B in several quarters. An inflection appears around late 2023; beginning with the 2023-12-31 period, net income started to exceed operating cash flow and that divergence widened through 2024 and into 2025.
In the most recent year both metrics increased, but net income outpaced operating cash flow each quarter. Trailing twelve-month net income rose from $10.59B at 2024-12-31 to $20.64B at 2025-12-31, while operating cash flow rose from $8.82B to $16.81B over the same span. The gap at 2025-12-31 was $3.83B (net income higher). The most recent trailing twelve-month net income was $20.64B and the most recent trailing twelve-month operating cash flow was $16.81B.
The Earnings vs. Cash Flow Gap
Reported earnings (Net Income) doesn't always reflect actual cash generation. Companies use accrual accounting, which recognizes revenue when earned and expenses when incurred—not when cash actually changes hands. This creates timing differences and opportunities for accounting discretion that can mask underlying business health.
Net Income (the "earnings" number) can be influenced by non-cash items like depreciation, stock-based compensation, and changes in accounting estimates.Operating Cash Flow, however, shows the actual cash the business generates from its core operations—a harder number to manipulate.
Trailing Twelve Months
What to Look For
Key Insight: Companies with durable competitive advantages typically show operating cash flow that meets or exceeds net income over time, demonstrating they convert accounting profits into actual cash that can be returned to shareholders or reinvested in the business.
Measuring management's efficiency at generating profits from shareholder capital
ELI LILLY & Co's trailing twelve‑month return on equity has risen markedly over the last two years, climbing from 47.9% at 2024-03 to a sustained high in the mid-to-high 70s by late 2025. Quarterly ROE moved sequentially from 54.1% (2024-06) to 58.8% (2024-09) and then jumped to 74.6% (2024-12). After a modest dip to 70.5% in 2025-03 the series resumed an upward path through 75.5% (2025-06), 77.4% (2025-09) and 77.8% (2025-12), showing a recent plateau at elevated levels.
Over the full history shown the metric has exhibited notable inflection points: relatively steady mid‑teens to low‑40s levels through much of the 2010s, an extreme spike in 2019–2020 with values exceeding 100% and peaking at 319.1% (2019-12), followed by a normalization and then the recent upward trend from 2024 onward. The most recent quarterly ROE was 77.8%.
The Gold Standard of Profitability
Return on Equity (ROE) is a powerful measure of how effectively a company's management is using the money shareholders have invested. Calculated by dividing Net Income by Shareholders' Equity, it reveals how much profit is generated for every dollar of equity capital.
A consistently high ROE (typically above 15-20%) is often the signature of a "quality" business with a durable competitive advantage. It indicates that the company can generate high returns on its own capital, which it can then reinvest at these high rates to compound value over time.
What to Look For:
How the company generates and deploys its cash
ELI LILLY & Co’s trailing twelve‑month operating cash flow rose steadily over the period and accelerated in 2025, moving from $3.68B (2024‑03‑31) and $8.82B (2024‑12‑31) to $16.06B (2025‑09‑30) and $16.81B (2025‑12‑31). Investing cash flow has been consistently negative and increased in magnitude over the same span, shifting from roughly -$2.48B in early 2021 to a peak outflow of -$11.48B (2025‑03‑31) and easing slightly to -$10.97B (2025‑12‑31). The most recent TTM operating cash generation exceeds TTM investing outflows by \$5.84B.
Financing cash flow has been volatile: large negative TTM values around 2021–2022 gave way to sizeable positive inflows in mid‑2024 (e.g., $5.36B on 2024‑06‑30 and $5.00B on 2024‑09‑30), smaller positive amounts through early 2025, and a return to a negative TTM value in the latest quarter at -$2.21B (2025‑12‑31). The most recent values are: Operating Cash Flow (TTM) $16.81B; Investing Cash Flow (TTM) -$10.97B; Financing Cash Flow (TTM) -$2.21B.
Understanding Company Strategy
Capital allocation refers to how management decides to spend and invest the company's cash. Analyzing the three primary categories of cash flow reveals a company's true operational strategy:
What to look for: Is the company bootstrapping (funding growth solely from operating cash)? Are they borrowing to fund aggressive expansion or dividends? Or are they capital raising by issuing new shares, potentially diluting your ownership? A healthy, mature company typically generates strong operating cash, moderately invests in growth, and returns the surplus to shareholders through financing activities.
Trailing Twelve Months
Net assets attributable to each share — the accounting floor of intrinsic value
Why Book Value per Share Matters
Book value per share is the net worth of the company — total assets minus total liabilities — divided by shares outstanding (split-adjusted). It represents the theoretical liquidation value per share if every asset were sold and every liability repaid at balance-sheet carrying values. It is the accounting foundation upon which much of equity valuation is built.
A steadily rising book value per share is one of the most reliable signals of compounding wealth creation. It means the company is retaining earnings and building net worth faster than it is returning capital or eroding it. Warren Buffett famously tracked Berkshire Hathaway's book value per share for decades as his primary measure of intrinsic value growth.
Context is essential. Asset-heavy businesses (banks, manufacturers, utilities) should be judged by book value more directly than asset-light businesses (software, consumer brands), where intangible assets like intellectual property and customer loyalty may far exceed their balance-sheet carrying values. A company trading at a large premium to book value is not necessarily overvalued — it may simply possess competitive advantages that accounting rules do not capture. Conversely, a declining book value per share — especially over multiple years — is a serious warning sign of capital destruction.
How much of the company is financed by debt versus shareholders' equity
Reading the Debt-to-Equity Ratio
The debt-to-equity (D/E) ratio compares total financial debt to shareholders' equity. A ratio of 1.0 means the company has borrowed one dollar for every dollar of equity; a ratio of 2.0 means it has borrowed twice as much as it owns. Financial leverage amplifies both returns and risk: in good times, debt turbocharges equity returns; in bad times, it accelerates losses and can threaten solvency.
Trends matter more than a single number. A rising D/E ratio can mean the company is taking on debt to fund growth — potentially value-creating if returns exceed the cost of capital. But it can also mean equity is being eroded through losses or that the business is borrowing simply to sustain operations. A falling D/E ratio generally reflects strengthening financial health: earnings are being retained, debt maturities are being paid down, or both.
Industry norms vary enormously. Capital-intensive sectors (utilities, real estate, financials) routinely carry high D/E ratios that would be alarming in, say, a technology company. Always compare against sector peers. As a rough rule of thumb, a D/E above 2× in a cyclical business warrants careful scrutiny of interest coverage and refinancing risk.
Short-term liquidity — can the company cover its near-term obligations?
Liquidity: Can the Business Pay Its Bills?
The current ratio is calculated as current assets divided by current liabilities. A ratio of 1.5 means the company has $1.50 of short-term assets — cash, receivables, inventory — for every $1.00 of obligations due within the next twelve months. It is the most direct measure of near-term financial resilience: can the business meet its obligations without needing to raise new capital or sell long-term assets at a discount?
A ratio above 1.0 is generally healthy, meaning current assets exceed current liabilities. A ratio consistently above 2.0 may indicate the company is holding excess cash or inventory that could be deployed more productively. A ratio below 1.0 is a warning sign — the company is relying on future cash generation or external financing to cover its near-term obligations, which is manageable in normal conditions but dangerous during a downturn.
Trends and context matter.A declining current ratio isn't always alarming — highly efficient businesses (e.g., large retailers with reliable daily cash flows) often run leaner balance sheets intentionally. Conversely, a rapidly rising current ratio can signal slowing sales causing inventory to build, or customers taking longer to pay. Always compare the trend against industry peers and cross-reference with the cash flow statement to assess whether the business is genuinely liquid or just holding non-cash current assets.
How much the market is paying for each dollar of company earnings
ELI LILLY & Co’s trailing twelve-month P/E has moved materially since mid‑2024. After peaking at 112.0x in 2024-06 and remaining elevated at 95.2x in 2024-09 and 65.6x in 2024-12, the ratio fell through 2025: 66.9x (2025-03), 50.8x (2025-06) and 37.3x (2025-09) before ticking up to 46.8x in 2025-12. The most pronounced recent inflection was the decline from the 2024 mid-year peak into 2025, with a modest rebound in the latest quarter.
Over the longer history shown, the P/E rose from single digits in the early 2010s into the 20–40x range by the mid‑2010s, included extreme negative readings in 2017-12 (-373.1x) and 2018-06 (-537.0x), and moved into much higher multiples from 2021 onward. The most recent quarterly Price-to-Earnings ratio was 46.8x.
What Is the PE Ratio?
The Price-to-Earnings (PE) ratio is one of the most widely used valuation metrics in investing. It divides the current stock price by the company's earnings per share (EPS), revealing how much investors are willing to pay for each dollar of earnings. A high PE can signal that the market expects strong future growth, while a low PE may suggest undervaluation—or reflect genuine concerns about the company's prospects.
Context matters:PE ratios vary significantly across industries. High-growth technology companies routinely trade at PE ratios above 30x or 40x, while mature, low-growth sectors like utilities or financials often trade closer to 10–15x. Always compare a company's PE to its own history and its industry peers, not just an absolute number.
What to Look For:
Key Insight:The PE ratio is a snapshot of market sentiment and expectations. Tracking it over time alongside earnings trends reveals whether the market's valuation has expanded or contracted—and whether that change is justified by fundamentals.