Eli Lilly Stock Is On Track to Do Something It Hasn't Done Since 2016

Eli Lilly (NYSE:LLY) has been a tremendous growth stock over the years. But thus far in 2026, it's been a fairly underwhelming buy. As of Monday's close, it was up around 8%. While that's a decent return, it trails the S&P 500, which is up by 13%. The stock is on track for its worst performance since 2016, which is the last time it failed to deliver double-digit returns. That year, it declined by nearly 13%.

Is this a sign that the growth stock has run out of room to rise higher?

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Has Eli Lilly's stock become too expensive?

While Eli Lilly's stock hasn't always beaten the market, it has generated annual returns of at least 10% since 2017. It's been a solid growth investment. Inevitably, however, as its valuation rises so quickly, the stock becomes more expensive. In the past five years, for instance, its valuation has soared by more than 400%.

The healthcare company has been doing exceptionally well, with significant demand for its GLP-1 drugs resulting in record revenue and profit. Its growth rate has been accelerating, and thus, investors have been willing to pay more for the stock.

Currently, however, it's trading at close to 40 times its trailing earnings, which may have investors thinking twice about whether it's still a good buy. While it is a dominant player in the GLP-1 market, many healthcare companies are developing drugs to get a piece of the pie; competition may chip away at its dominance in the future. And paying a high premium for the stock may be difficult to justify given the long-term uncertainty in the GLP-1 market.

Is Eli Lilly stock still a good buy?

Eli Lilly has been generating terrific results thus far, and it still has plenty of growth opportunities ahead, not only in GLP-1 but also in other areas of healthcare. Its vast, growing business is why the stock may still have room to rise much higher in the future.

However, I do think that at its current valuation, there isn't much margin of safety for investors should its growth slow due to rising competition, or if unexpected developments or regulations in the healthcare sector impact its growth potential.

The stock may continue to do well and rise in value over the years, but investors buying it at this high a valuation should brace for the possibility that lower, more modest returns become the norm.

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.