Elanco’s 26.6% return over the past six months has outpaced the S&P 500 by 23.6%, and its stock price has climbed to $23.47 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Is now the time to buy Elanco, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Is Elanco Not Exciting?

We’re glad investors have benefited from the price increase, but we don't have much confidence in Elanco. Here are three reasons you should be careful with ELAN and a stock we'd rather own.

1. Lackluster Revenue Growth

We at StockStory place the most emphasis on long-term growth, but within healthcare, a stretched historical view may miss recent innovations or disruptive industry trends. Elanco’s recent performance shows its demand has slowed as its annualized revenue growth of 3.3% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs.

2. Shrinking Adjusted Operating Margin

Adjusted operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D. It also removes various one-time costs to paint a better picture of normalized profits.

Analyzing the trend in its profitability, Elanco’s adjusted operating margin decreased by 3.3 percentage points over the last two years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Its adjusted operating margin for the trailing 12 months was 16.5%.

3. Previous Growth Initiatives Have Lost Money

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Elanco’s five-year average ROIC was negative 2.4%, meaning management lost money while trying to expand the business. Investors are likely hoping for a change soon.

Final Judgment

Elanco’s business quality ultimately falls short of our standards. With its shares outperforming the market lately, the stock trades at 23× forward P/E (or $23.47 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.

Stocks We Like More Than Elanco

ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.

Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.

Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.