Eli Lilly and Company (LLY)vs UnitedHealth Group Incorporated (UNH)

Quick verdict

The gap in returns on capital is the headline here: for the twelve months to June 2026, Eli Lilly turned invested capital into a 34.4% return, against 12.4% at UnitedHealth — roughly a threefold difference, and the clearest dividing line between these two healthcare names. Lilly wins growth, quality and balance sheet on our scoring; UnitedHealth takes valuation and income, and momentum is too close to call, leaving an overall 3.5 to 2.5 in Lilly's favour. The trade-off is priced in. At the 4 September 2026 close Lilly changed hands at 38.6 times trailing earnings and 31.9 times book, while UnitedHealth sat at 25.5 times earnings and 3.4 times book with a 6.6% free-cash-flow yield and a 2.25% dividend. One is a patent-driven margin machine; the other is a vast, low-margin claims and services business.

At-a-glance comparison

Business model and revenue mix

These are both healthcare companies in name only. Lilly develops and sells prescription medicines, with diabetes and obesity treatments Mounjaro and Zepbound alongside oncology, generating $79.7bn of revenue in the twelve months to June 2026 at an 83.4% gross margin and a 43.3% operating margin. Because Lilly reports no operating-income line, its operating profit of $34.5bn is measured before interest and tax. UnitedHealth runs health-insurance plans through UnitedHealthcare plus the Optum services, pharmacy and data arm, and its scale is on a different order: $450.1bn of revenue over the same period, about five to six times Lilly's, converted into $21.7bn of reported operating profit. The economics follow the model — a drug developer keeps a large share of each dollar of sales; an insurer passes most of it through as medical costs, booking a 4.8% operating margin.

Valuation

On every multiple in our data UnitedHealth is the cheaper share, and our valuation verdict goes to it. At the 4 September 2026 close it traded on 25.5 times trailing earnings, 0.79 times sales, 3.4 times book and 15.5 times EV/EBITDA, with a free-cash-flow yield of 6.63%. Lilly carried 38.6 times earnings, 13.6 times sales, 31.9 times book, 30.8 times EV/EBITDA and a 1.68% free-cash-flow yield. The price-to-sales spread is largely a function of business model rather than sentiment — an insurer's revenue line includes premiums that flow straight back out as claims. The offset for Lilly is growth: its PEG ratio of 0.78 suggests the earnings multiple is modest relative to recent earnings expansion. No PEG is available for UnitedHealth, whose trailing EPS growth has been negative.

Growth profile

Momentum in the fundamentals belongs to Lilly, and the verdict reflects it. From fiscal 2022 to fiscal 2025 its revenue compounded at 31.7% a year and earnings per share at 49.3%; stretched back to the 2020 base year, the rates are 21.6% and 27.6%. That is unusually fast for a company of this size, driven by the incretin franchise, and the three-year figures start from a pre-launch base, so they flatter the trend relative to what a mature portfolio would deliver. UnitedHealth grew revenue at 11.4% a year over the three years to fiscal 2025 and 11.7% over five — steady, if unspectacular — but earnings per share went backwards, at -14.5% annually over three years and -3.8% over five. Top-line expansion without earnings follow-through points to margin pressure rather than shrinking scale.

Profitability and quality

Margins tell the same story from the other end. Lilly converted 33.5% of revenue into net profit over the twelve months to June 2026, producing $26.7bn of net income from $79.7bn of sales, with an 83.4% gross margin. UnitedHealth's gross margin is nominally higher at 88.6%, but that reflects how the business reports costs rather than superior economics — its operating margin is 4.8% and its net margin 3.1%, delivering $14.1bn of net income on $450.1bn of revenue. Cash generation narrows the gap: UnitedHealth produced $23.6bn of free cash flow against Lilly's $18.2bn, so the smaller earner is the larger cash generator, a reminder that insurance float and working capital flatter reported cash flow. Our quality verdict still favours Lilly, on the strength of margin structure and returns on capital.

Balance-sheet risk

Neither company is lightly geared, but Lilly has more room. As at 30 June 2026 it held $9.0bn of cash against $54.9bn of total debt, equal to 1.26 times EBITDA, with interest covered 38.5 times by operating profit and a current ratio of 1.35. UnitedHealth carried $28.6bn of cash and $73.3bn of debt, a heavier 1.72 times EBITDA, with interest coverage of 5.6 times and a current ratio of 0.78. A sub-one current ratio is normal for an insurer, where claims reserves sit in current liabilities, so it should not be read as a liquidity warning; the coverage gap is the more telling number, since Lilly's far thicker operating margin absorbs the same interest bill many times over. The balance-sheet verdict goes to Lilly on those grounds.

Price performance and shareholder returns

Return on invested capital is where this pairing separates decisively: 34.4% at Lilly against 12.4% at UnitedHealth for the twelve months to June 2026. Return on equity widens the gap further, to 102.4% versus 13.8%, but that figure needs care — Lilly's equity base is just $33.9bn against $26.7bn of net income, and years of buybacks and dividends have kept book value thin, so ROE overstates the underlying advantage. ROIC is the fairer comparison and still shows a near-threefold edge. UnitedHealth's 12.4% is a respectable return for a capital-intensive, regulated insurer carrying $104.5bn of equity, and it exceeds most plausible costs of capital. But a patent-protected drug portfolio earning 43.3% operating margins simply consumes less capital per dollar of profit.

Which stock fits which investor

Style tags split cleanly: Lilly reads as high-growth, high-quality; UnitedHealth as a blend. Growth-oriented investors are pointed to Lilly, with 31.7% three-year revenue compounding and a 0.78 PEG, provided they accept 38.6 times earnings and 31.9 times book. Quality screens land in the same place, on a 34.4% ROIC and 43.3% operating margin. Value and income both favour UnitedHealth: 0.79 times sales, a 6.63% free-cash-flow yield, a 2.25% dividend yield with a 57.3% payout ratio, against Lilly's 0.58% yield on a 21.7% payout. Buyback yields are close — 0.57% versus 0.46% — so neither is meaningfully more shareholder-return-driven through repurchases. On our overall score Lilly edges it 3.5 to 2.5, but the two appeal to genuinely different mandates rather than sitting on the same spectrum.

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

Frequently asked questions

Which company earns better returns on capital?

Eli Lilly, and by a wide margin. Over the twelve months to June 2026 it generated a 34.4% return on invested capital against UnitedHealth's 12.4% — close to three times the return. On return on equity the gap looks even larger, 102.4% versus 13.8%, though Lilly's thin $33.9bn equity base exaggerates that figure.

Why is UnitedHealth so much cheaper on price-to-sales?

UnitedHealth traded at 0.79 times sales at the 4 September 2026 close versus 13.6 times for Lilly, but that is mostly business model. An insurer's $450.1bn of revenue includes premiums that flow out again as medical costs, leaving a 4.8% operating margin; Lilly keeps 43.3% of sales as operating profit.

Has UnitedHealth's earnings been growing?

No. Revenue compounded at 11.4% a year from fiscal 2022 to fiscal 2025, but earnings per share fell at 14.5% a year over the same span and 3.8% a year from the 2020 base year. Top-line growth without earnings follow-through indicates margin compression.

Which pays the better dividend?

UnitedHealth, on a 2.25% yield with $8.95 per share paid over the twelve months to June 2026 and a 57.3% payout ratio. Lilly yields 0.58% from $6.69 per share, with a 21.7% payout leaving more retained for reinvestment.

Who generates more free cash flow?

UnitedHealth, despite lower earnings — $23.6bn of free cash flow in the twelve months to June 2026 against Lilly's $18.2bn. That translates into a 6.63% free-cash-flow yield versus 1.68% for Lilly, reflecting both the cash characteristics of insurance and the difference in market capitalisation.

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