Eli Lilly vs Novo Nordisk: What's the Better GLP-1 Stock to Buy?

Eli Lilly (NYSE:LLY) and Novo Nordisk (NYSE:NVO) are leading drugmakers in the highly lucrative GLP-1 market, where demand is through the roof for weight loss medications. But despite both stocks possessing tremendous growth opportunities, it's been Eli Lilly that's been surging in value over the past year, while Novo's valuation has been declining.

Is that pattern likely to continue in the future, or could Novo be the better buy right now, given its more modest valuation?

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The case for Eli Lilly

Eli Lilly has surged more than 50% in value over the past 12 months, as the company's results have been incredible. Not only has the stock made for a steady and safe healthcare investment over the years, but now, it's also become a tremendously popular growth stock to own.

While it may not have been first out of the gate with a GLP-1 drug, that clearly hasn't hurt the business or its stock value. In its most recent quarterly results, which went up to the end of September, the company posted 39% revenue growth, with its top line rising to $24.4 billion. In light of the strong demand for its popular GLP-1 drugs, Zepbound and Mounjaro, the company also raised its full-year guidance by $5.5 billion, now projecting at least $91 billion in revenue. A few years ago, in 2024, the company's revenue was just under half of that, totaling $45 billion.

The company's business has been booming, largely due to its GLP-1 drugs. Eli Lilly is still in the midst of developing other treatments which may be even more effective for patients. With it generating strong results and continuing to grow at a high rate, it's hard not to like Eli Lilly as a long-term investment to simply buy and hold.

The case for Novo Nordisk

Novo Nordisk has disappointed investors as it lost its pole position in the GLP-1 market. But the race is by no means over, as there may be even greater demand for these types of treatments in the future, as they may be used to treat conditions beyond just weight loss and diabetes.

While Novo Nordisk has stumbled a bit, its recent results suggest that the picture isn't all that bleak for the company. Novo reported 6% revenue growth in its most recent quarter (4% when excluding the impact of foreign currency), and it also raised its guidance for the year. Previously, it was expecting its adjusted sales growth to be within a range of 0% and -6%. Now, however, it's expecting positive growth of up to 2%, as the improved outlook is driven by higher GLP-1 sales expectations.

This isn't the type of growth Eli Lilly has been generating, not even close. But the company may bridge the gap in the future, as a higher-dose version of Wegovy has helped some patients lose close to 28% of their body weight. That would put it effectively on par with Eli Lilly’s top treatment, and as the rollout of the higher-dose drug takes place, Novo may see a further boost in revenue.

Another reason Novo Nordisk makes for a more attractive option is that it trades at around 10 times its trailing earnings, while Eli Lilly's stock is much more expensive, with it trading at a price-to-earnings multiple of 45.

Novo Nordisk may have much more upside at this stage

Eli Lilly has generated fantastic returns for investors, rallying more than 400% in five years. Its growth has been impressive, but its valuation effectively prices in a lot of continued growth and only seems reasonable on the assumption that it'll continue to dominate the GLP-1 market, which I don't think is likely. With Novo Nordisk still very much in the game and other healthcare companies developing weight loss treatments of their own, there will inevitably be more competition ahead for Eli Lilly to worry about. There's some downside risk there.

Meanwhile, Novo Nordisk is a bit of an underdog these days, and with a much more modest valuation, it has the potential to generate more significant gains for investors. While it needs to execute well for that to happen, I’m confident that with some solid assets in its portfolio, its growth rate will improve in the future. It's the GLP-1 stock I own today, and I plan to hang on to it for the foreseeable future.

David Jagielski, CPA has positions in Novo Nordisk. The Motley Fool has positions in and recommends Eli Lilly and Novo Nordisk. The Motley Fool has a disclosure policy.