Is Eli Lilly Stock Running out of Steam?

Eli Lilly (NYSE: LLY) is an iconic company in the healthcare sector, with a robust, diverse business that enables it to continue adapting and growing. The craze around its GLP-1 drugs has unlocked the latest wave of growth for the business, propelling it to new heights.

But has the healthcare stock gotten too rich and too expensive to still be a good buy at its current valuation? It has generated incredible returns in recent years, and it trades at 40 times earnings; it isn't cheap. Has it run out of steam, or is the premium for this top growth stock justifiable?

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Another growth catalyst could be on the horizon

Eli Lilly's returns have been impressive, driven by the huge success of its GLP-1 drugs, Mounjaro and Zepbound. During the first three months of the year, they were major drivers of the company's impressive 56% revenue growth. That's not the kind of growth that investors typically expect to see from such a large, well-established healthcare company as Eli Lilly, which is why it's been such a hot growth stock to own.

What's also encouraging is that the company plans to file for regulatory approval of its next-generation obesity drug as early as next year. Retatrutide has been progressing well in clinical trials, with patients losing more than 20% of their body weight, on average. It has also shown it can reduce cardiovascular risk, and may be a possible treatment for obstructive sleep apnea and other conditions. By 2030, analysts estimate it may already bring in $3.8 billion in annual revenue for the company.

By targeting three hormones, retatrutide takes a more aggressive approach, potentially leading to greater weight loss for patients while also helping address other health conditions along the way.

Is Eli Lilly stock still a good buy today?

Eli Lilly's valuation may look expensive right now, but as its earnings potential rises, it will make for a more tenable investment. GLP-1 drugs remain in their early growth stages, and if they are approved for more indications, their growth prospects could expand considerably. With Eli Lilly dominating the market, this can still be an excellent healthcare stock to buy today, given its impressive growth and strong financials.

It's down 11% from its high, and now may be as good a time as any to buy it, especially for investors looking for a solid long-term investment.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Eli Lilly. The Motley Fool has a disclosure policy.