Eli Lilly & Co. (NYSE:LLY)

An examination of long-term investment activity ratios reveals several trends over the five-year period. Generally, the ratios suggest a moderate decline in asset utilization efficiency, though some stabilization or slight improvement is noted in the most recent year. The analysis focuses on net fixed asset turnover, total asset turnover, and equity turnover.

Net Fixed Asset Turnover

The net fixed asset turnover ratio decreased from 3.15 in 2021 to 2.64 in 2023, indicating a diminishing ability to generate sales from fixed assets. The decline slowed in 2024 and 2025, with the ratio remaining relatively stable at 2.63 and 2.64 respectively. When considering operating leases and right-of-use assets, a similar downward trend is observed, moving from 2.93 in 2021 to 2.45 in 2023, followed by slight increases to 2.48 and 2.51 in 2024 and 2025. This suggests that including lease obligations further emphasizes the decreasing efficiency of fixed asset utilization.

Total Asset Turnover

The total asset turnover ratio exhibited initial stability between 2021 and 2022 at 0.58. A decrease to 0.53 was recorded in 2023, representing a reduced ability to generate sales from all assets. The ratio partially recovered in 2024 to 0.57 and returned to 0.58 in 2025, indicating a potential stabilization of overall asset utilization.

Equity Turnover

The equity turnover ratio experienced a decline from 3.15 in 2021 to 2.68 in 2022. A subsequent increase to 3.17 was observed in 2023 and remained constant in 2024. However, a notable decrease to 2.46 occurred in 2025, suggesting a reduced ability to generate sales from shareholder equity in the latest year. This fluctuation warrants further investigation to determine the underlying causes.

In summary, the observed trends suggest a general weakening in asset utilization efficiency between 2021 and 2023, with some indicators showing signs of stabilization or modest improvement in 2024 and 2025. The decrease in equity turnover in 2025 is a particular point of interest and may require further scrutiny.

The analysis reveals a complex relationship between revenue, net property, plant, and equipment (PP&E), and the resulting net fixed asset turnover ratio over the five-year period. While revenue demonstrates substantial growth, the efficiency with which fixed assets generate revenue appears to be declining, though stabilizing in recent years.

Revenue Trend

Revenue exhibits a consistent upward trajectory. Starting at US$28,318 million in 2021, it increased to US$28,541 million in 2022, then experienced more significant growth, reaching US$34,124 million in 2023. This growth accelerated further in 2024 to US$45,043 million, culminating in a substantial US$65,179 million in 2025. This indicates a strong and accelerating expansion of sales.

Net PP&E Trend

Net property, plant, and equipment also increased steadily throughout the period. Beginning at US$8,985 million in 2021, it rose to US$10,144 million in 2022, US$12,914 million in 2023, US$17,102 million in 2024, and finally US$24,675 million in 2025. The rate of increase in net PP&E generally aligns with revenue growth, but with a lag, suggesting investments in fixed assets are supporting the revenue expansion.

Net Fixed Asset Turnover Ratio

The net fixed asset turnover ratio, which measures the revenue generated per dollar of net fixed assets, decreased from 3.15 in 2021 to 2.81 in 2022. This downward trend continued to 2.64 in 2023. The ratio remained relatively stable at 2.63 in 2024 and 2.64 in 2025. This suggests that while revenue is growing, the company is becoming less efficient in utilizing its fixed assets to generate that revenue. However, the stabilization of the ratio in the last two years may indicate that the decline has bottomed out, and the increased investment in PP&E is beginning to yield proportional revenue gains.

In summary, the company demonstrates strong revenue growth accompanied by increasing investment in fixed assets. However, the net fixed asset turnover ratio indicates a diminishing, though now stabilizing, efficiency in asset utilization. Further investigation may be warranted to understand the drivers behind the initial decline and the reasons for the recent stabilization.

Over the five-year period examined, revenue demonstrated a consistent upward trajectory, while the value of property and equipment, net of accumulated depreciation and including operating lease right-of-use assets, also increased. However, the net fixed asset turnover ratio, which measures the efficiency with which a company utilizes its fixed assets to generate revenue, exhibited a more nuanced pattern.

Revenue Trend

Revenue increased from US$28,318 million in 2021 to US$65,179 million in 2025. This represents a substantial growth rate over the period, accelerating particularly between 2023 and 2025.

Fixed Asset Investment Trend

Property and equipment, net, increased from US$9,671 million in 2021 to US$25,935 million in 2025. This indicates a significant investment in fixed assets over the period, aligning with the revenue growth.

Net Fixed Asset Turnover Ratio Trend

The net fixed asset turnover ratio decreased from 2.93 in 2021 to 2.45 in 2023. This suggests a declining efficiency in utilizing fixed assets to generate revenue during this timeframe. However, the ratio stabilized in 2024 at 2.48 and experienced a slight increase to 2.51 in 2025. This stabilization and modest improvement may indicate that the recent investments in fixed assets are beginning to contribute to revenue generation, or that the rate of asset investment is becoming more aligned with revenue growth.

The initial decline in the net fixed asset turnover ratio, despite increasing revenue and fixed assets, could be attributed to several factors. These include the timing of asset acquisitions relative to revenue generation, potential inefficiencies in asset utilization, or a shift in the company’s business model requiring more capital-intensive operations. The subsequent stabilization and slight increase suggest a potential reversal of these trends, but continued monitoring is warranted to assess the long-term impact of the asset investments on operational efficiency.

The total asset turnover ratio remained relatively stable over the five-year period, fluctuating between 0.53 and 0.58. While revenue and total assets both increased consistently year-over-year, the ratio did not demonstrate a clear upward or downward trajectory.

Revenue Trend

Revenue exhibited consistent growth throughout the period, increasing from US$28,318 million in 2021 to US$65,179 million in 2025. This represents a substantial overall increase, indicating expanding sales activity.

Total Asset Trend

Total assets also increased steadily, rising from US$48,806 million in 2021 to US$112,476 million in 2025. This growth in assets parallels the revenue increase, suggesting investment in resources to support sales expansion.

Total Asset Turnover Ratio Analysis

The total asset turnover ratio, which measures how efficiently a company uses its assets to generate revenue, was 0.58 in both 2021 and 2025. A slight dip to 0.53 was observed in 2023, followed by a recovery to 0.57 in 2024. The consistency of this ratio suggests that the company’s asset utilization efficiency has remained largely unchanged despite significant growth in both revenue and assets. The ratio indicates that for every dollar of assets, approximately US$0.53 to US$0.58 of revenue is generated.

The parallel increases in revenue and total assets, coupled with the stable asset turnover ratio, suggest a consistent operational approach. The company appears to be scaling its operations in proportion to its revenue growth, maintaining a similar level of efficiency in asset utilization.

The equity turnover ratio for the analyzed period demonstrates fluctuations alongside increasing revenue and shareholders’ equity. Initially, the ratio decreased before stabilizing and then declining again. A closer examination reveals a complex relationship between revenue generation and equity utilization.

Overall Trend

The equity turnover ratio began at 3.15 in 2021, decreased to 2.68 in 2022, and then recovered to 3.17 in both 2023 and 2024. A subsequent decline to 2.46 is observed in 2025. This indicates periods of both efficient and less efficient equity utilization relative to revenue.

Revenue and Equity Relationship

Revenue exhibited consistent growth throughout the period, increasing from US$28,318 million in 2021 to US$65,179 million in 2025. Shareholders’ equity also increased, though at a varying pace, rising from US$8,979 million in 2021 to US$26,535 million in 2025. The initial decrease in equity turnover in 2022 occurred despite a slight increase in revenue, suggesting a slower rate of revenue generation relative to the growth in equity. The stabilization in 2023 and 2024 coincided with continued revenue growth and a moderate increase in equity. The final decrease in 2025, however, occurred alongside substantial revenue growth, indicating a significant increase in equity outpacing revenue gains.

Ratio Interpretation

An equity turnover ratio measures how effectively a company uses shareholders’ equity to generate revenue. A higher ratio generally suggests greater efficiency. The observed fluctuations suggest changes in the company’s operational efficiency or investment strategies. The decline in 2025, despite substantial revenue growth, warrants further investigation to determine if the increased equity base is tied to long-term investments that have not yet fully translated into revenue or if it represents a less efficient use of capital.

In summary, the equity turnover ratio reflects a dynamic interplay between revenue growth and equity expansion. While revenue consistently increased, the ratio’s performance indicates varying levels of efficiency in utilizing equity to generate that revenue, with a notable decrease in efficiency observed in the final year of the analyzed period.