Eli Lilly & Co. (NYSE:LLY)

Net cash provided by operating activities

Over the five-year period, net cash provided by operating activities exhibited fluctuations with an overall upward trend. Starting at 6,499,600 thousand US dollars in 2020, it increased to a peak of 7,260,700 thousand US dollars in 2021. A slight decline followed in 2022, with cash flow dropping to 7,084,400 thousand US dollars. In 2023, there was a significant decrease to 4,240,100 thousand US dollars, representing a notable reduction in operating cash flow. However, the figure rebounded sharply in 2024, reaching 8,817,900 thousand US dollars, the highest level in the analyzed period.

Free cash flow to the firm (FCFF)

The free cash flow to the firm also showed variability but with a less consistent pattern compared to operating cash flow. It started at 5,407,947 thousand US dollars in 2020 and grew steadily to 6,257,398 thousand US dollars in 2021. The subsequent year saw a decline to 5,527,095 thousand US dollars. In 2023, FCFF dropped significantly to a low of 1,115,658 thousand US dollars, pointing to decreased free cash generation capacity. In 2024, there was a recovery to 4,242,370 thousand US dollars, though the value remained below that of earlier years, indicating partial restoration of free cash flow levels.

Overall Observations

Both key cash flow metrics demonstrated resilience with intermittent lows, particularly in 2023 where sharp declines were observed. Despite these dips, 2024 showed recovery trends, more pronounced in net operating cash flows than in FCFF. The divergence in the magnitude of recovery may reflect variations in capital expenditures, working capital requirements, or other investing activities during these periods. Continuous monitoring of these cash flows is advisable to understand the underlying drivers of volatility and to assess sustainability of cash flow generation.

Effective Income Tax Rate (EITR)

The effective income tax rate demonstrated a decreasing trend from 14.33% in 2020 to a low of 8.25% in 2022, indicating a reduction in tax expense relative to income during this period. However, this trend reversed in 2023, with the rate increasing significantly to 20.05%, followed by a decrease to 16.49% in 2024. Overall, the tax rate exhibits some volatility with a notable spike in 2023.

Cash Payments for Interest on Borrowings, Net of Tax

Cash payments for interest on borrowings, net of tax, showed a generally upward trajectory over the five-year period. Beginning at $296,247 thousand in 2020, there was a slight increase in 2021 to $306,498 thousand, followed by a small decline in 2022 to $296,995 thousand. From 2022 onwards, the payments increased more substantially, reaching $323,158 thousand in 2023 and then rising sharply to $482,270 thousand in 2024. This increase suggests growing interest expenses, potentially reflecting higher debt levels or rising interest rates.

The financial data exhibits significant fluctuations across the analyzed periods. A notable upward trend is observed in the enterprise value (EV), which more than quadrupled from approximately 211 billion US dollars in 2020 to over 852 billion US dollars by the end of 2024. This rapid increase is especially pronounced between 2022 and 2023, where the EV more than doubled.

Conversely, the free cash flow to the firm (FCFF) does not follow a consistent upward trajectory. After peaking at around 6.26 billion US dollars in 2021, the FCFF declined in 2022 to approximately 5.53 billion US dollars. This decline is followed by a steep drop in 2023 to about 1.12 billion US dollars, partially recovering to 4.24 billion US dollars in 2024. The variability in FCFF suggests fluctuations in operational cash generation or changes in investment and financing activities that affect free cash flow.

The EV/FCFF ratio, an indicator of valuation relative to cash flow generation, reflects these divergent trends sharply. Initially stable around 39 in 2020 and 2021, it escalated dramatically to approximately 59 in 2022, then surged to an extraordinary 655 in 2023 before settling at about 201 in 2024. The extreme spike in 2023 indicates a substantial disconnect between enterprise value and free cash flow, likely signaling elevated market expectations, asset revaluations, or temporary operational challenges.

Enterprise Value (EV)

Exhibits a consistent and steep upward trend, increasing more than fourfold over five years, with a pronounced spike between 2022 and 2023.

Free Cash Flow to the Firm (FCFF)

Shows volatility with an initial increase, followed by a decline and partial recovery, indicating possible fluctuations in cash-generating efficiency or investment activities.

EV/FCFF Ratio

Displays marked volatility, remaining stable initially but then sharply increasing, peaking in 2023, which suggests a significant change in valuation relative to cash flow during this period.

Overall, the data points to a rapidly increasing enterprise valuation accompanied by unstable cash flow performance, resulting in elevated valuation multiples that may warrant closer examination of underlying drivers and potential risks.