Novo Nordisk vs. Eli Lilly: What’s the Better Long-Term Investment?

Novo Nordisk (NVO +3.58%) and Eli Lilly (LLY 1.41%) are rivals in the GLP-1 drug market and are behemoths in the healthcare sector, with massive valuations. But these stocks have been going in opposite directions in the past year. While Eli Lilly has been soaring to new heights, Novo has been in a seemingly endless tailspin.

It’s important to remember, however, that the past doesn’t predict the future. Below, I’ll look at which of these healthcare stocks may possess more upside from here on out, and which one may be the better long-term investment if you invest today.

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Eli Lilly’s growth has been far more impressive

Eli Lilly has generated incredible results due to the stellar performance of its GLP-1 products, Mounjaro (approved for diabetes) and Zepbound (approved for weight loss). Combined, they are generating nearly $12 billion in sales on a quarterly basis and are responsible for the vast majority of Eli Lilly’s growth. This year, the company anticipates its full-year revenue will be within a range of $80 billion to $83 billion, which would suggest a growth rate as high as 27%.

Today’s Change

(-1.41%) $-14.95

Current Price

$1043.23

Key Data Points

Market Cap

$988B

Day’s Range

$1043.14 – $1106.71

52wk Range

$623.78 – $1133.95

Volume

94

Avg Vol

3.5M

Gross Margin

85.40%

Dividend Yield

0.57%

Novo Nordisk, on the other hand, has been struggling with rising competition. What has spooked investors is that the company is projecting that its adjusted sales growth rate for this year will be negative; Novo projects its top line will decline between 5% to 13% (on an adjusted basis, reflecting its true organic growth). The company has been battling compounding pharmacies and is suing Hims & Hers, alleging that its compounded drugs infringe on Novo’s patents. If it can successfully put a stop to copycat drugs, that could help improve Novo’s troubling growth prospects.

Today’s Change

(3.58%) $1.71

Current Price

$49.34

Key Data Points

Market Cap

$166B

Day’s Range

$49.01 – $51.08

52wk Range

$43.08 – $93.80

Volume

1.7K

Avg Vol

22M

Gross Margin

80.90%

Dividend Yield

3.50%

Are these stocks mispriced?

Eli Lilly stock trades at around 46 times its trailing earnings, while Novo Nordisk is at a price-to-earnings multiple of just 13. That’s a significant difference in valuation, reflecting how investors are viewing the stocks these days. This may, however, reflect too much optimism around Eli Lilly’s stock and perhaps too much bearishness around Novo Nordisk.

The price you pay for a stock can have a drastic impact on your overall returns, as buying high could mean limited gains (or perhaps even lead to losses) if the company fails to meet high expectations. Meanwhile, buying at a significant discount could leave you with a healthy buffer and set you up for better returns down the road.

This is why I’d go with Novo Nordisk stock today. While it’s facing some adversity right now, investors shouldn’t count it out. There’s still a lot of hope for the company as it’s in the midst of rolling out its GLP-1 weight loss pill, and its growth days are far from being over. It may be a bit of a contrarian pick right now, but it may generate better results than Eli Lilly, given its more attractive valuation.