Inflationary pressures and geopolitical conflicts have kept energy prices elevated, and the global economy remains unable to shake off carbon fuels. Against this backdrop, the healthcare industry has demonstrated resilience due to its inelastic demand. Medtronic (MDT) attracts value and income investors with its high dividend yield and low valuation, and its turnaround results are gradually emerging; Eli Lilly (LLY), on the other hand, has become a focus for growth investors thanks to its market leadership in GLP-1 weight-loss drugs and its pipeline expansion. The two represent the value and growth paths within the healthcare sector respectively, offering different choices for investors worried about inflation.
Medtronic is one of the world’s largest medical device manufacturers. The stock offers a dividend yield as high as 3.3%, at a historical high, and its dividend has increased for 49 consecutive years, putting it just one step away from “Dividend King” status. Its price-to-sales ratio and price-to-earnings ratio are both below their five-year averages, which should appeal to both dividend investors and value investors.
But why is Medtronic so cheap? The answer is that, over time, this medical device maker’s business became bloated and its growth slowed. This situation is not uncommon, and management set out to address it by refocusing on the fastest-growing and most profitable businesses and exiting undesirable divisions. The heavy lifting has been completed, and Medtronic appears to have reached a turning point.
Wall Street has still not given the company recognition, but it may be worth stepping in while the stock still appears discounted. Notably, fiscal 2026 sales grew 8.4%, the highest in a decade. Fiscal 2027 first-quarter performance was even better, with sales rising nearly 14%. New products, including the Hugo surgical robot, are helping drive revenue growth. If inflation is a concern, this unloved healthcare stock may be a good choice for investors focused on value or income.
Eli Lilly sits at the opposite extreme in terms of valuation. Although its price-to-sales ratio and price-to-earnings ratio are below their five-year averages, both are high in absolute terms. The stock’s dividend yield is only 0.6%, even lower than the S&P 500’s meager 1%. However, Eli Lilly is a leader in the GLP-1 weight-loss drug field, and growth investors may want to take a closer look.
GLP-1 drugs are relatively new, and demand is enormous. Currently, the company’s weight-loss drugs account for about two-thirds of its sales. This is a risk, because drug patent protection is time-limited. But as oral medications become the primary method of administration, the weight-loss market is likely to continue expanding. Therefore, the GLP-1 story may not yet be fully told.
Nevertheless, its long-term appeal lies in the fact that Eli Lilly is using the cash generated by weight-loss drugs to broaden its drug pipeline. Through acquisitions, this pharmaceutical giant has expanded into new therapeutic areas, laying the foundation for growth in the post-GLP-1 era. The company is currently performing strongly on all fronts and has successfully used this to build an engine for the future. Inflation is unlikely to slow Eli Lilly down.
