BRAZIL - 2021/04/14: In this photo illustration, the Medtronic logo seen displayed on a smartphone ... [+] screen. (Photo Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images)
We think that Medtronic stock (NYSE: MDT) is currently a better pick than Eli Lilly stock (NYSE: LLY), given Medtronic’s MDT better prospects and comparatively lower valuation. MDT stock trades at a P/S ratio of 4.4x, compared to 9.7x for LLY stock. The gap in the valuation of these two companies can be attributed to better revenue growth and higher profitability of Eli Lilly LLY . Although both the companies are in different businesses, we compare them due to their similar revenue base. While both companies saw a rise in revenue in recent years, Eli Lilly’s growth has been better.
Looking at stock returns, Eli Lilly’s 55% growth is much better than Medtronic’s -16% change over the last twelve months. This compares with a -1% change in the broader S&P 500 index. While both the companies are likely to see continued top-line expansion, Medtronic is expected to outperform. There is more to the comparison, and in the sections below, we discuss why we believe MDT stock will offer better returns than LLY stock in the next three years. We compare a slew of factors such as historical revenue growth, returns, and valuation multiple in an interactive dashboard analysis of Medtronic vs. Eli Lilly: Which Stock Is A Better Bet? Parts of the analysis are summarized below.
1. Eli Lilly’s Revenue Growth Has Been Stronger Over The Recent Years
Annual Revenue Growth Forecast - MDT vs. LLY
2. Eli Lilly Is More Profitable, And It Has A Better Debt Position
3. The Net of It All
Stock Return Forecast - MDT vs. LLY
While MDT stock may outperform LLY, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Medtronic vs. Masco.
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