1 Growth Stock Down 9% to Buy Right Now

Not many companies that have been around since the late 1800s can claim that they're growth companies. But Eli Lilly (NYSE: LLY) can. However, even growth stocks with long and impressive track records can see their share prices take a breather.

Eli Lilly's stock is down about 6.4% over the last year through June 12. Some may worry about such a drop, but I don't believe that's a warning sign for investors. Rather, investors should think of this dip as a buying opportunity.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Eli Lilly is gaining in weight loss

Eli Lilly has two weight-loss drugs on the market, Mounjaro (which also treats type 2 diabetes) and Zepbound. Both can now be classified as blockbuster drugs (which have over $1 billion in annual sales). Demand for the products shows no signs of slowing. First-quarter Mounjaro sales more than doubled year over year from $1.8 billion to $3.8 billion, with management also noting the product's expansion into new geographic markets. Zepbound's sales more than quadrupled from $517.4 million to $2.3 billion.

Finding a more convenient way of taking this medication could spur additional demand. Currently, patients inject themselves weekly with the drugs, which has been a deterrent for some wanting to obtain prescriptions. In April, Eli Lilly management announced a successful phase 3 trial of a daily oral treatment for type 2 diabetes and weight loss. The company expects to submit the drug for approval later this year (weight loss) and in 2026 (diabetes).

Eli Lilly's growth appears to be sustainable

The two products accounted for about 48% of Eli Lilly's most recent quarterly sales and drove most of the top-line growth. With a large and growing market, and the entry of a product that will make it more convenient to take the treatment, that growth should prove sustainable for a long period.

Eli Lilly has already been taking market share from chief rival Novo Nordisk (NYSE: NVO). Novo Nordisk has been struggling, and its new treatment failed to meet expectations. Meanwhile, Eli Lilly's existing weight-loss drugs appear to produce better results. In fact, Eli Lilly had difficulty meeting skyrocketing demand in the past. That's a nice problem to have.

Eli Lilly's total first-quarter revenue grew 45% year over year to $12.7 billion, and its diluted earnings per share (EPS) under generally accepted accounting principles (GAAP) was $3.06, 23% higher. Management expects this year's EPS to come in at $20.17 to $21.67. While it reduced its guidance from $22.05 to $23.55, the updated figures are still a tremendous increase from the $11.71 a share Eli Lilly earned in 2024.

Healthier valuation

You can't call Eli Lilly shares a bargain based on the stock's trailing price-to-earnings (P/E) ratio. The shares trade at a P/E of 63 compared to the S&P 500 index's 29. Still, a year ago, when the stock price was higher, the P/E ratio stood at 125.

Of course, earnings have been growing rapidly. Based on analyst estimates for the next year, Eli Lilly's stock has a forward P/E of 36. Hence, it seems the above-average valuation is justified based on growth expectations. The fast top-line and bottom-line pace doesn't seem likely to subside given Eli Lilly's leadership and potential new products in the fast-growing weight loss category.

That presents a good opportunity for growth-seeking investors, and it's why I'd use the stock dip as a buying opportunity.

Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.