At the European Association for the Study of Diabetes meeting in Milan, Eli Lilly and Company (NYSE:LLY) presented data showing that its oral GLP-1 pill, Foundayo, delivered greater weight loss and better blood sugar control than oral semaglutide 25 mg in adults with type 2 diabetes. The bigger question is what this means for a stock valued at about $1 trillion.
We recently published a list of the 10 best Return on Equity stocks to buy, and LLY ranks 5th. See which of the five stocks offer even higher ROE than Eli Lilly.
A Win With a Catch
Patients taking 17.2 mg of Foundayo lost 1.5% more body weight after 52 weeks than those taking oral semaglutide 25 mg. Foundayo is a once-daily pill FDA-approved for weight management approved for adults with obesity, as well as some adults with overweight and related health problems.
But the comparison has a limitation. The results are based on an indirect comparison between two separate trials, not a head-to-head study. The 95% confidence interval put the weight-loss advantage at 0.2 to 2.7 percentage points in favor of Foundayo. The company also points out that the 25 mg semaglutide dose is not approved in the United States for type 2 diabetes.
But the bigger picture goes beyond the drug’s performance, with the stock’s valuation also worth a closer look.
What a 31x Multiple Assumes?
Eli Lilly’s forward P/E stands at 30.93x, about 32% below its most recent historical average of 45.6x. That represents a substantial discount to the stock’s usual valuation. That lower valuation likely reflects slowing growth. EPS is forecasted to grow 52.62% in 2026 as demand for Mounjaro and Zepbound surges, helping drive a 48% increase in second-quarter revenue. But the comparison gets harder each year as the earnings base grows, with EPS growth projected to moderate to 28.80% in 2027.
Even at a discount to its historical multiple, 31x earnings leave little room for execution mistakes on a $1.02 trillion market value. To me, Eli Lilly looks fairly valued given its growth profile, but not cheap. The new data strengthens the growth story, but it is not enough on its own to change the valuation.
According to our database, the number of hedge funds holding the stock rose from 132 at the end of Q1 2026 to 152 at the end of Q2 2026. Short interest was just 0.84% of float as of September 15, 2026.
The Foundayo results are a positive development, but the comparison was indirect, and the advantage was small. That alone cannot justify a $1 trillion valuation. Rising hedge fund ownership, limited short interest, and a valuation below Lilly’s historical level make the stock look solid, but investors still need stronger evidence.
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