Two names. Eli Lilly is the subject and is passed on valuation; Novo Nordisk is named once, in the final line, as the preferred way to own the same GLP-1 theme — and is a portfolio holding elsewhere in this archive. Drugs (Mounjaro, Zepbound, Trulicity, Donanemab, Verzenio, Ozempic, Wegovy) and CEO David Ricks are discussed but are not securities. Research legend: QT Qualtrim · SA Seeking Alpha · STK Stock Analysis. Written post with no timestamps — the At link opens the article.
| Ticker | Name | Research | View | What he said | At |
|---|---|---|---|---|---|
| NVO | Novo Nordisk | QT · SA · STK · FA | Positive | The preferred way to own the same theme — and the post's last sentence. Named twice: as the co-owner of the market ("they dominate the entire market for diabetic and obesity care together with Novo Nordisk") and as the competitive risk to Lilly ("Eli Lilly faces strong competition from Novo Nordisk, the maker of Ozempic and Wegovy. The race to dominate the obesity and diabetes market is becoming more intense"). The conclusion inverts that: "We feel more comfortable with Novo Nordisk." No valuation work is shown here — the preference is stated, not argued, and rests on the price comparison rather than on business quality. | read ↗ |
| LLY | Eli Lilly and Company | QT · SA · STK · FA | Neutral | A published pass — 8.2/10 on quality, declined on price. Stock $1,163.0, market cap $1.1 trillion, classified "Oligopoly." The moat is five-part (patents, 10-12 year FDA approval cycles, physician trust, presence in 120+ countries, R&D reinvestment at ~25% of revenue) with GLP-1 stickiness on top — "patients stay on these drugs long-term, making revenue extremely sticky" — behind a gross margin of 82.8% and ROIC of 32.5%. Growth is exceptional (revenue +13.0% and EPS +27.0% CAGR over ten years; owner's earnings +27.5%), and management is credited: "CEO David Ricks took charge in 2017. Since then, shares are up over +1.400% (!)." The block is price: forward PE 32.2x against a 30.3x ten-year average, and a reverse DCF requiring 18.9% annual net-income growth for a 10% return when "I think Eli Lilly should be able to grow its EPS by 10-15% per year in the long term." Verdict: "a phenomenal business. But we think it's too expensive right now. We will wait patiently for a more attractive valuation." | read ↗ |
This is the archive's second explicit pass on a name that scores well — HEICO on 5 July (7.8/10, valuation 2/10) and now Lilly (8.2/10, valuation 6/10). The pattern is worth holding on to: a deep dive here is as likely to end in a "follow list" verdict as in a purchase, and the deciding input in both cases was the reverse DCF's implied growth rate measured against the author's own forecast — not against the analyst consensus, which for Lilly is far higher (32.8% expected EPS growth over two years, described as "very optimistic").
A jargon-free summary of the thesis behind each argued name. (Renders on each name's consolidated page.)
Eli Lilly invents drugs and sells them while the patent lasts. Its two big prizes right now are the weight-loss and diabetes injections Mounjaro and Zepbound, and an Alzheimer's drug called Donanemab that, if approved, could add billions a year. Between Lilly and Novo Nordisk, essentially two companies own the obesity market.
The business quality is not in dispute anywhere in the piece. It keeps about 83 cents of gross profit on every dollar of sales, earns roughly a third on every dollar of capital it puts to work, and has turned $10,000 in 1992 into $1.8 million — against $0.3 million for the index. The moat is layered: patents, an approval process that takes a decade and billions of dollars to clear, doctors who trust the brand, a sales network in 120 countries, and patients who stay on these particular drugs indefinitely, which makes the revenue behave like a subscription.
There is one clever technical move worth understanding. Lilly spends 12% of sales on factories and equipment, which by his usual rule would make it too capital-hungry to own. He splits that spending into two kinds: the part needed just to keep existing plants running, and the part building new capacity for growth. Using depreciation as a proxy for the first, only 2.8% of sales is genuinely maintenance — the rest is expansion, which is a choice rather than a burden. Corrected that way, the business passes comfortably.
What stops him is price. Three valuation methods are run and they do not agree, which is the point. Against its own ten-year history the stock is slightly expensive. The forward-return model says about 11.9% a year if earnings grow 13% and the multiple drifts down — acceptable. But the reverse calculation, which asks what growth today's price already assumes, says Lilly must grow profits 18.9% a year for a decade just to hand you 10%. He himself expects 10-15%. Paying a price that requires more than you believe is the definition of no margin of safety, so he passes and waits — and says he is more comfortable owning Novo Nordisk for the same theme.
Novo Nordisk is the other half of the GLP-1 duopoly — the maker of Ozempic and Wegovy, and the company Lilly is racing. It appears twice in this piece: once as the partner in dominance ("they dominate the entire market for diabetic and obesity care together with Novo Nordisk") and once as the principal competitive risk to the stock being analysed.
Then the final sentence flips the framing: "We feel more comfortable with Novo Nordisk." No workings are shown for that preference here — it is an expression of relative price, not a claim that Novo is the better business. The whole Lilly analysis is a demonstration that quality and price are separate questions, and this closing line is the practical consequence: when you want exposure to a theme but the best-quality name is priced for perfection, the cheaper participant in the same duopoly is the position.
Novo is a portfolio holding elsewhere in this archive, where the August update notes its Oral Wegovy and higher-dose injection approvals across the EU — and also shows it as the one holding whose earnings are forecast to go sideways to 2028, which is worth reading alongside this endorsement.
Summary derived from the archived Compounding Quality post (text in transcript.txt) for personal study. Not investment advice. © Compounding Quality / Pieter Slegers for source material.