Eli Lilly and Company (LLY)vs UNH Holdings, Inc. (UNH)

Quick verdict

Eli Lilly and Company (LLY) and UNH Holdings, Inc. (UNH) appeal to different investors. On our six-factor framework, LLY scores 3 and UNH scores 3. LLY looks cheaper on the multiples that matter, while neither clearly grows faster and neither clearly earns higher returns on capital. The two are evenly matched overall, so your priority — value, growth, income or safety — should decide it.

2-year relative performance

At-a-glance comparison

Business model and revenue mix

Eli Lilly and Company operates in Drug Manufacturers (Healthcare), while UNH Holdings, Inc. sits in Credit Services (Financial Services). The two operate in different sectors, so cyclicality and end-market exposure differ — factor that into any portfolio overlap. LLY carries a beta of 1.61 versus 1.20 for UNH, meaning LLY has historically been the more volatile of the two.

Valuation

On valuation, LLY is the cheaper stock. LLY trades on a forward P/E of 25.73 and EV/EBITDA of 18.53, against 38.25 and 36.06 for UNH. Price-to-sales is 5.29 vs 13.57, and free-cash-flow yield is 3.4% vs 5.9%. A higher multiple is only justified if the company can sustain faster growth or wider margins, which is exactly what the next sections test.

Growth profile

neither clearly is the faster grower. LLY has compounded revenue at 13.7% over three years with EPS growth of 16.1%, while UNH has delivered 11.7% revenue and 17.1% EPS growth. Growth like this is the single biggest driver of long-term returns, but it also tends to come with a richer valuation, so it must be weighed against the multiples above.

Profitability and quality

On profitability and quality, neither clearly is stronger. LLY posts a 12.2% operating margin, 34.6% return on equity and 7.9% return on invested capital. UNH posts 26.0%, 8.2% and 14.0% respectively. Return on invested capital above roughly 15% is a hallmark of a durable competitive advantage, so this metric deserves particular attention.

Balance-sheet risk

LLY has the safer balance sheet. LLY carries net-debt/EBITDA of 1.15x with a current ratio of 2.81, versus 4.37x and 3.26 for UNH. Lower leverage gives a company more room to invest through a downturn and reduces the risk of dilution or distress.

Price performance and shareholder returns

Over the past year LLY returned 16.5% against 83.0% for UNH; on a three-year annualised basis it is 0.6% vs 38.2%. LLY yields 0.0% and UNH yields 3.9%. Past performance never guarantees future results, but the multi-year track record shows how the market has rewarded each business so far.

Which stock fits which investor

For value-oriented investors, LLY is the better fit on today's multiples. Growth investors will likely prefer LLY, which is expanding faster. Income investors should lean toward UNH for its higher shareholder yield, while investors who prize quality-at-a-reasonable-price will favour UNH for its superior returns on capital. This is a comparison of facts, not a recommendation — your time horizon, risk tolerance and existing holdings should drive the final decision.

• Value: LLY
• Growth: LLY
• Income: UNH
• Quality: UNH

Frequently asked questions

Is LLY or UNH the better buy right now?

Neither is universally "better." LLY scores 3 and UNH scores 3 on our six-factor framework. LLY is cheaper, neither clearly grows faster, and neither clearly is higher quality — so the right pick depends on your objective.

Which stock is cheaper, LLY or UNH?

LLY is the cheaper stock across forward P/E (25.73 vs 38.25), EV/EBITDA (18.53 vs 36.06) and price-to-sales (5.29 vs 13.57).

Which has grown faster, LLY or UNH?

neither clearly has the stronger growth profile, with three-year revenue CAGR of 13.7% for LLY versus 11.7% for UNH.

Which stock pays a bigger dividend?

LLY yields 0.0% and UNH yields 3.9%, so UNH is the stronger income choice.

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