Share count
496Mpeak FY2024
← All companies ← ELA Manual ELF → ← EBS Pharmaceuticals ENLV →
ELAN, Elanco Animal Health Incorporated
Elanco Animal Health Incorporated is a global leader in animal health, dedicated to innovating and delivering products and services to prevent and treat disease in farm animals and pets.
We partner with farmers, pet owners, veterinarians and society to create value and help our customers improve the health of animals in their care, while also making a meaningful impact on the communities we serve.
Our diverse, durable product portfolio is sold in more than 90 countries and serves animals across many species, primarily: dogs and cats (collectively, pet health) and cattle, poultry, swine and sheep (collectively, farm animal).
The business
What it sells, where the money comes from, the kind of company it is.
Revenue · FY2025
$4.7B
+6.2% YoY · 8% 5-yr CAGR
Vital signs · TTM, with 5-yr average
Revenue $4.9B 5-yr avg $4.5B
Revenue $1.4B +14.9% vs yr-ago qtr
Net income $57M yr-ago $67M
Net margin 4.2% yr-ago 5.6%
The business in brief
read the 10-K →What this business is and what moves its needle, from its own SEC filings.
- What it is
- Revenue is led by Pet Health (49%) and Cattle (24%), with 3 more lines behind.
- Situation
- Unprofitable. No sustained operating profit across the record; an earnings multiple has nothing to rest on. What the record does show is revenue, the gross-margin trajectory, and the burn against the cash on hand.
- What moves the needle
- Operating margin has reached 11% at its best but run negative through the cycle (median −4.8%) on a 52% gross margin — so the question is which reading is truer: whether the median was pulled below zero by one-off charges, by the cycle, or by spending it is still growing into, and whether it settles back at a profit. Inventory runs near 35% of sales, so how fast it turns back into cash — and the risk of writing it down when demand softens — sits alongside the margin. Read this kind of business on the pipeline against the patent cliff, and pricing. On its own account, the filing leans hardest on customer concentration, set against the numbers in what the filing emphasizes, below.
- Is it a good business?
- Return on capital has rarely cleared the cost of capital (median −1%, above 15% in 0 of 10 years). By owner earnings: roughly 4% of revenue reaches owners as cash, consistently. This is price-taker territory, where the balance sheet and the cycle matter more than any multiple; the rest is in the 10-K.
Every line is arithmetic on the company's filings, shown in full in the sections below.
Where the money comes from
read the 10-K →Revenue spreads across 6 lines, the largest Pet Health at 49%.
Revenue by product line, FY2025
- Pet Health49%$2.3B
- Cattle24%$1.1B
- Poultry18%$858M
- Swine8%$379M
- Contract Manufacturing1%$53M
- Aqua0%$0
By geographyInternational53%United States47%
From the segment footnote of the company's own 10-K. Shares are of total revenue; the profit bar shows each segment's share of segment operating profit, before unallocated corporate costs.
The record
Ten years of arithmetic, read across the cycle.
The record, 2016–2025
realized figures from each filing · older years to the left| 2016’16 | 2017’17 | 2018’18 | 2019’19 | 2020’20 | 2021’21 | 2022’22 | 2023’23 | 2024’24 | 2025’25 | TTMTTMMar 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Income statement | |||||||||||
| $2.9B | $2.9B | $3.1B | $3.1B | $3.3B | $4.8B | $4.4B | $4.4B | $4.4B | $4.7B | $4.9B | RevenueRevenue |
| 52% | 48% | 49% | 52% | 49% | 55% | 57% | 56% | 55% | 55% | 55% | Gross marginGross mgn |
| 27% | 27% | 24% | 25% | 30% | 29% | 29% | 29% | 30% | 30% | 30% | SG&A / revenueSG&A/rev |
| 9% | 9% | 8% | 9% | 10% | 8% | 7% | 7% | 8% | 8% | 8% | R&D / revenueR&D/rev |
| ($22M) | ($233M) | $114M | $78M | ($675M) | ($571M) | ($72M) | ($1.2B) | $488M | ($224M) | $942M | Operating incomeOp. inc. |
| −0.8% | −8.1% | 3.7% | 2.5% | −20.6% | −12.0% | −1.6% | −27.1% | 11.0% | −4.8% | 19.3% | Operating marginOp. mgn |
| ($48M) | ($311M) | $87M | $68M | ($574M) | ($483M) | ($78M) | ($1.2B) | $338M | ($232M) | ($242M) | Net incomeNet inc. |
| — | — | 24% | 13% | — | — | — | — | 31% | — | — | Effective tax rateTax rate |
| Cash flow & returns | |||||||||||
| $156M | $174M | $487M | $224M | ($41M) | $483M | $452M | $271M | $541M | $560M | $577M | Operating cash flowOp. cash |
| $254M | $318M | $296M | $314M | $517M | $716M | $682M | $694M | $662M | $680M | $691M | DepreciationDeprec. |
| ($71M) | $141M | $79M | ($207M) | ($31M) | $184M | ($211M) | $762M | ($514M) | $44M | $54M | Working capital & otherWC & other |
| $110M | $99M | $135M | $140M | $135M | $159M | $171M | $140M | $147M | $276M | $262M | CapexCapex |
| 3.8% | 3.4% | 4.4% | 4.6% | 4.1% | 3.3% | 3.9% | 3.2% | 3.3% | 5.9% | 5.4% | Capex / revenueCapex/rev |
| $46M | $75M | $353M | $84M | ($176M) | $324M | $281M | $131M | $394M | $284M | $315M | Owner earningsOwner earn. |
| 1.6% | 2.6% | 11.5% | 2.7% | −5.4% | 6.8% | 6.4% | 3.0% | 8.9% | 6.0% | 6.4% | Owner earnings marginOE mgn |
| $46M | $75M | $353M | $84M | ($176M) | $324M | $281M | $131M | $394M | $284M | $315M | Free cash flowFCF |
| 1.6% | 2.6% | 11.5% | 2.7% | −5.4% | 6.8% | 6.4% | 3.0% | 8.9% | 6.0% | 6.4% | Free cash flow marginFCF mgn |
| $45M | $882M | $0 | $33M | $5.0B | $342M | $0 | $19M | $41M | $0 | $0 | AcquisitionsAcquis. |
| -0% | -2% | 1% | 1% | -4% | -3% | -0% | -8% | 3% | -2% | — | ROICROIC |
| -1% | -4% | 2% | 1% | -7% | -6% | -1% | -20% | 6% | -4% | -4% | Return on equityROE |
| −1% | −4% | 2% | 1% | −7% | −6% | −1% | −20% | 6% | −4% | −4% | Retained to equityRetained/eq |
| Balance sheet | |||||||||||
| $259M | $323M | $475M | $334M | $495M | $638M | $345M | $352M | $468M | $545M | $428M | Cash & investmentsCash+inv |
| — | $567M | $652M | $817M | $872M | $833M | $797M | $842M | $805M | $873M | $1.1B | ReceivablesReceiv. |
| — | $1.1B | $1.0B | $1.1B | $1.6B | $1.4B | $1.5B | $1.7B | $1.6B | $1.7B | $1.7B | InventoryInvent. |
| — | $204M | $205M | $223M | $501M | $416M | $390M | $270M | $296M | $368M | $372M | Accounts payablePayables |
| — | $1.4B | $1.5B | $1.6B | $1.9B | $1.8B | $1.9B | $2.3B | $2.1B | $2.2B | $2.4B | Operating working capitalOper. WC |
| — | $2.1B | $2.5B | $2.4B | $3.4B | $3.3B | $3.3B | $3.4B | $3.2B | $3.5B | $3.6B | Current assetsCur. assets |
| — | $643M | $971M | $819M | $2.1B | $1.6B | $1.7B | $1.2B | $1.3B | $1.6B | $1.7B | Current liabilitiesCur. liab. |
| — | 3.3× | 2.6× | 2.9× | 1.6× | 2.0× | 1.9× | 2.7× | 2.4× | 2.2× | 2.2× | Current ratioCurr. ratio |
| — | $3.0B | $3.0B | $3.0B | $6.2B | $6.2B | $6.0B | $5.1B | $4.4B | $4.8B | $4.7B | GoodwillGoodwill |
| — | $8.9B | $9.0B | $9.0B | $17.7B | $16.5B | $15.5B | $14.4B | $12.6B | $13.4B | $13.2B | Total assetsAssets |
| — | $0 | $2.5B | $2.4B | $6.1B | $6.3B | $5.8B | $5.8B | $4.3B | $4.0B | $4.0B | Total debtDebt |
| — | ($323M) | $2.0B | $2.0B | $5.6B | $5.7B | $5.5B | $5.4B | $3.9B | $3.5B | $3.6B | Net debt / (cash)Net debt |
| — | — | 3.9× | 1.0× | -4.5× | -2.4× | -0.3× | -4.3× | — | — | 3.7× | Interest coverageInt. cov. |
| $7.0B | $7.8B | $5.2B | $5.5B | $8.5B | $7.5B | $7.3B | $6.2B | $6.1B | $6.5B | $6.5B | Shareholders’ equityEquity |
| 0.7% | 0.9% | 0.8% | 1.6% | 1.4% | 1.4% | 1.3% | 1.0% | 1.2% | 1.4% | 1.5% | Stock comp / revenueSBC/rev |
| Per share | |||||||||||
| 293M | 293M | 314M | 370M | 441M | 487M | 488M | 492M | 497M | 496M | 506M | Shares out (diluted)Shares |
| $9.93 | $9.85 | $9.78 | $8.29 | $7.42 | $9.78 | $9.03 | $8.97 | $8.93 | $9.50 | $9.67 | Revenue / shareRev/sh |
| $-0.16 | $-1.06 | $0.28 | $0.18 | $-1.30 | $-0.99 | $-0.16 | $-2.50 | $0.68 | $-0.47 | $-0.48 | EPS (diluted)EPS |
| $0.16 | $0.26 | $1.12 | $0.23 | $-0.40 | $0.67 | $0.58 | $0.27 | $0.79 | $0.57 | $0.62 | Owner earnings / shareOE/sh |
| $0.16 | $0.26 | $1.12 | $0.23 | $-0.40 | $0.67 | $0.58 | $0.27 | $0.79 | $0.57 | $0.62 | Free cash flow / shareFCF/sh |
| $0.38 | $0.34 | $0.43 | $0.38 | $0.31 | $0.33 | $0.35 | $0.28 | $0.30 | $0.56 | $0.52 | Cap. spending / shareCapex/sh |
| $23.93 | $26.53 | $16.57 | $14.97 | $19.16 | $15.41 | $14.93 | $12.64 | $12.26 | $13.19 | $12.85 | Book value / shareBVPS |
Per-share growththe realized rate an owner's share compounded
| 9-yr | 5-yr | |
|---|---|---|
| Revenue / share | −0.5%/yr | +5.1%/yr |
| Owner earnings / share | +15.6%/yr | — |
| Capital spending / share | +4.4%/yr | +12.7%/yr |
| Book value / share | −6.4%/yr | −7.2%/yr |
The record, charted
FY2016–2025Each measure over its full record; the current point and the worst year marked.
ROIC
−2%low FY2023
Gross margin
55%low FY2017
Net debt ÷ owner earnings
12.2×peak FY2023
Owner earnings vs. net income
Owner earningsNet incomeThe accountant's number, and the cash an owner can take; the gap is the tell.
$284Mowner earningsvs.($232M)net incomelow FY2020
Where the cash went
ReinvestBuybacksDividendsAcquisitionsRetainedBeyond op. cashEach year's outlays against its operating cash: the mix, and how it drifts. The hatched cap is spending beyond that year's operating cash — financed from the balance sheet or borrowing, not operations.
FY2016FY2025
Net income is the accountant's number; owner earnings is the cash an owner could take out. The walk between them, off the cash-flow statement, and whether the gap is widening or holding.
In fiscal 2025 the business turned a $232M loss into $284M of owner earnings: more cash than the profit line showed, after the non-cash charges and the capital it put back in.
| FY2025 | FY2024 | FY2023 | FY2022 | FY2021 | |
|---|---|---|---|---|---|
| Reported net income | ($232M) | $338M | ($1.2B) | ($78M) | ($483M) |
| Depreciation & amortizationnon-cash charge added back | +$680M | +$662M | +$694M | +$682M | +$716M |
| Stock-based compensationreal costnon-cash, but a real cost | +$68M | +$55M | +$46M | +$59M | +$66M |
| Working capital & othertiming of cash in and out, other non-cash items | +$44M | −$514M | +$762M | −$211M | +$184M |
| Cash from operations | $560M | $541M | $271M | $452M | $483M |
| Capital expenditurecash put back in to keep running and to grow | −$276M | −$147M | −$140M | −$171M | −$159M |
| Owner earnings | $284M | $394M | $131M | $281M | $324M |
| Owner-earnings marginowner earnings ÷ revenue | 6% | 9% | 3% | 6% | 7% |
Owner earnings is the cash an owner could pull out without starving the business: operating cash less the capital it must spend to hold its position . The cash-flow statement also adds stock comp back as non-cash, but it is a real cost paid in shares; counted as the expense it is (less $68M), owner earnings is nearer $216M.
Maintenance capex is estimated as depreciation where a growing business invests above it; free cash flow is the figure the scorecard's free-cash margin reads.
Quality & stewardship
Returns, the balance sheet, capital allocation, and pay.
Owner’s Scorecard
FY2025 10-K · source on SEC EDGAR →
Will it survive?
- AdequateOperating income $764M ÷ interest expense $277M
What this means
Comfortable in a normal year, but below the margin of safety Graham looked for. Worth checking how stable the coverage has been across a full cycle.
- How heavy is the debt, net of cash? $3.5B · 4.5× operating profitHeavy net debtCash $545M − debt $4.0B
What this means
Netting $545M of cash and short-term investments against $4.0B of debt leaves $3.5B owed, about 4.5× a year's operating profit (5.3× on the gross debt, before the cash). Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.
- Long (60+ days)DSO 68 + DIO 299 − DPO 63 days
What this means
Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash.
Is it a good business?
- Below average through the cycle10-yr median, range -8%–3%; the latest year is left out — large non-operating charges put its operating line well above pretax profitIndustry peers: median 1%
What this means
The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; a return below the cost of capital (~8%) erodes value as a business grows rather than building it — the test Buffett weighs most. The headline is the median of the last 10 years, so one peak or trough year doesn't set the verdict. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.
- Solid, recently turned positivelatest $284M = operating cash $560M − maintenance capex $276M; positive each of the last 3 years, after an earlier loss stretch (10-yr median 3%)Industry peers: median 6%
What this means
What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's 6% of revenue this year, a 3% median across 10 years. Treating stock comp as the real expense it is (less $68M of SBC) leaves $216M.
- Loss, but cash-generativeNet income ($232M) · cash from operations $560M
What this means
The company reported a net loss, so a conversion ratio isn't meaningful. What matters then is whether operations still threw off cash, here, they did.
How is the cash used?
- Not enough data
What this means
The filing data didn't include the inputs for this check.
- Investing or harvesting? 0.41×HarvestingCapex $276M ÷ depreciation $680M
What this means
Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.
Graham’s defensive tests · 2 of 5 met
Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.
- Adequate size PassRevenue ≥ $2B · $4.7B
What this means
Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.
- Strong liquidity PassCurrent ratio ≥ 2× · 2.17×
What this means
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
- Conservative debt MissDebt ≤ working capital · $4.0B vs $1.9B WC
What this means
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
- Earnings stability MissA profit every year (10-yr record) · 7 loss years
What this means
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
- Dividend record MissUninterrupted dividends · none paid
What this means
An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.
- Earnings growth —Earnings +33% over the record · —
What this means
Earnings were negative early in the record, a growth rate isn't meaningful.
- Moderate price —P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
What this means
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are $-0.75/share (latest year $-0.46), the averaged base the calculator's gate runs on, and book value is $13.11/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.
Durability & moat, 2016–2025
Whether the record’s returns held, and what the capital reinvested earned.
- Profitable years 3 of 10
What this means
Lost money in 7 year(s), look at what happened there before trusting the average.
- Return on capital ≥ 15% 0 of 9 yrs
What this means
A moat shows up as a high return on invested capital that holds year after year, not one good vintage.
- Operating margin −2% → −7% (3-yr avg ends)
In the filing’s words The filing claims pricing power in its strongest form — price raised, volume held — yet the margin here has not widened to match. The claim leads the record; weigh them together.
What this means
Through the cycle the operating margin slipped — about −2% early to −7% lately, median −5% — competition or costs are biting in.
- Reinvestment, incremental ROIC −7%
What this means
Reinvested capital came back at a negative incremental return over this window — the invested base grew while operating profit did not. The filings show where it went.
- Owner earnings growth +21%/yr
What this means
Owner earnings grew about 21% a year over the record.
- Worst year 2023 · −27.1% op. margin
What this means
Operations went underwater in 2023, understand why before trusting the good years.
- Share count +6.0%/yr
What this means
The share count is rising, dilution works against you on a per-share basis.
Does AI threaten the moat?
Low contestabilityThe moat is physical, regulated or balance-sheet-funded, the kind AI cuts costs within but does not contest.
In its own filing Named as a competitive risk
Its FY2025 10-K names artificial intelligence as a competitive threat.
“We use machine learning and artificial intelligence (AI) in our business, and challenges with properly managing its use could result in operational, competitive or reputational harm and legal liability.”
AI is unlikely to contest a moat that is physical, regulated or balance-sheet-funded; here it reads more as a cost tool than a threat.
Read from the filing's own risk factors, paired with the industry's structure under its SIC code; the durability is read above, the price below.
All figures as filed; the source filing is linked above.
Current Position
as of the latest quarter, Mar 31, 2026Can the business pay what it owes this year, off the freshest balance sheet: the quality of the assets, the debt actually coming due, and what a low ratio means here.
Current assets$3.6B
- Cash & short-term investments$428M
- Receivables$1.1B
- Inventory$1.7B
- Other current assets$355M
Current liabilities$1.7B
- Debt due within a year$44M
- Accounts payable$372M
- Other current liabilities$1.2B
Current ratio2.16×all current assets ÷ what's due · Graham looked for 2×
Quick ratio1.12×stricter: inventory excluded
Cash ratio0.26×strictest: cash alone against what's due
Working capital$1.9Bthe cushion left after near-term bills
Debt due this year vs. cash$44M due · $428M cash
covered by cash on hand, no refinancing forced · both figures from the Mar 31, 2026 balance sheet
Revenue, latest quarter vs. a year ago+14.9%the freshest read on whether the business is still growing
Current ratio, recent quarters2.9× → 2.2×
Deeper floors
Tangible book value($1.4B)equity stripped of goodwill & intangibles
Net current asset value($3.1B)Graham's net-net: current assets less all liabilities
Debt incl. operating leases$3.9B$124M of it operating leases
Deferred revenue$400Mcustomer cash collected before delivery; operating float
From the company's latest filing.
Debt maturity
the debt note, SEC EDGAR →Not how much it owes, but when it falls due, and against what. The ladder the company files, beside cash on hand and a year's owner earnings.
Bars scaled to the largest single year.
Due in the next 12 months$63Mthe first rung: what must be repaid or rolled over within the year
Within two years$126Mthe near wall, the part most exposed to today’s credit conditions
Biggest single year$1.2Bin 2028the lumpiest maturity, where a refinancing, if needed, is largest
Due over the next five years$1.9Bthe near slice; the balance sheet carries $4.0B of debt in all
Against what the business has and earns
Cash & short-term investments, Mar 31, 2026$428M
One year of owner earnings (FY2025)$284M
Together, against $63M due next year11.3×
Cash on hand as of Mar 31, 2026 plus a year’s owner earnings comes to $712M against the $63M due in the twelve months after the Dec 31, 2025 schedule: 11 times it.
Maturity schedule extracted from the company’s Dec 31, 2025 annual report and reconciled to the balance-sheet debt.
How the cash was used, 2016–2025
Over the record, the business generated $3.3B of operating cash; how management split it reads as a balanced allocator, splitting cash between the business, owners, and the balance sheet.
- Reinvested$1.5B · 46%
- Retained (debt / cash)$1.8B · 54%
- Net change in share count72.5%
The diluted count rose from 293M to 506M: issuance (stock pay, deals) outran any buybacks, so owners were diluted on net.
- Dividend record—
No dividend line was reported in the filing data over the span; the record here neither confirms nor rules out a payout.
Buybacks are gross of stock issued to staff; the share-count line above is the net of that, the figure that decides whether owners gained. The average price paid blends a year of purchases (and any accelerated repurchase), so it is close, not exact. The record of where the cash went and on what terms.
Acquisitions & goodwill
from the balance sheet & the 10-year cash-flow recordGoodwill grows only when a company acquires and falls only when it concedes it overpaid. The size of that bet, the cash put into buying rather than building, and how much has already been written off.
Goodwill & intangibles$8.2B61% of all assets; the premium carried on the balance sheet for businesses acquired
Against book equity73%goodwill is this share of book equity; the rest is the company’s own retained and paid-in capital
Cash spent acquiring$6.4Bover 10 years buying other businesses, against $1.5B of capital spent building
$1.0B written down across 1 year (2023): goodwill the company has already conceded it overpaid for, charged against earnings. That is roughly 16% of the cash it put into acquisitions over the span. A write-down costs no cash (the cash went out when the deal was signed), but it is management marking its own past judgment to market.
Goodwill, acquired intangibles and equity from the latest balance sheet; acquisition spend and write-downs summed across the 10-year record, from the company's own filings.
Management, ownership & pay
read the proxy →From the proxy: how much of the business the people running it own, and how they are paid, beside what the business earned for its owners in the same years.
| Fiscal year | Chief executive | Pay, as filed | “Actually paid” | Owner earnings |
|---|---|---|---|---|
| 2021 | Mr. Jeffrey Simmons | $12.1M | $16.5M | $324M |
| 2022 | Mr. Jeffrey Simmons | $12.7M | −$2.0M | $281M |
| 2023 | Mr. Jeffrey Simmons | $13.7M | $17.3M | $131M |
| 2024 | Mr. Jeffrey Simmons | $14.8M | $9.2M | $394M |
| 2025 | Mr. Jeffrey Simmons | $14.9M | $37.8M | $284M |
Both pay figures are the company’s own, from the pay-versus-performance table its proxy statement files. “As filed” is the Summary Compensation Table total: salary, bonus, and equity awards at their value on the day of grant. “Actually paid” is the SEC’s prescribed recalculation, which re-marks those equity awards to what they became as they vested; it can swing far above or below the filed figure in either direction, and negative years occur. Owner earnings are the whole business's, from the record above, for the same fiscal years.
- Insider ownership<1%
The stake all directors and executive officers hold together, per the 2026 proxy: skin in the game, the first thing Munger reads.
- Stock-based compensation$68M
The slice of the business handed to employees in shares this year, 1% of revenue, equal to 9% of operating profit. Buffett's oldest accounting fight: this is compensation, compensation is an expense, real whether or not the headline earnings admit it. One trap: the cash-flow statement adds SBC back, so the operating cash, and the owner earnings drawn from it, are flattered by exactly this amount; counted as the cost it is, what an owner keeps is lower.
Inverting the record
Invert: instead of why Elanco Animal Health Incorporated is a good business, the question is what would make owning it a mistake, and whether those marks are in the record. Disconfirming tests across 2016–2025.
2 of the 3 tests turned up something to look into; the other 1 came back clean.
- Look hereDid the share count rise anyway?72.5%
Diluted shares grew 72.5% over 2016–2025. Owners were diluted on net; each share owns less of the business than it did. Read the buyback line beside this one, not on its own.
- Look hereAre "one-time" charges a yearly habit?10 of 10 years
Management took an impairment or write-down in 10 of the last 10 years, $1.7B in all. A charge taken almost every year is not one-time; it is the business — past deals coming due, and an admission the assets were worth less than what was paid. Munger's rule: when the "one-time" keeps happening, it is the business. Read it beside the goodwill the company still carries.
And these came back clean
- Is it less profitable than it was?
Each test is read from the filings and is noisy alone; a flag can mark a cyclical trough or a year of heavy investment as easily as a problem. The filing says which.
What an owner would ask, FY2025
read the 10-K →- How much of the revenue rides on one buyer?≈$587M · 12% of revenue on the largest customer (TTM)
“Our largest customer, an affiliate of Cencora, Inc., is a third-party veterinary distributor and represented approximately 12% of our total revenue in 2025.”verify →
- Which reported numbers are a judgment call?Management names Revenue recognition, Income taxes, Acquisitions as critical estimates
each rests partly on management's judgment; the filing's note sets out the assumptionsverify →
The questions the record and the charts do not answer on their own; each carries the figure and the place to look.
Peers, Pharmaceuticals
The same industry, side by side on owner economics. Each figure is a through-cycle median, so a peak or trough year can’t distort it; the group median at the foot is the line to read each against.
| Company | Revenue | Gross margin | Op. margin | ROIC | Owner earn. margin |
|---|---|---|---|---|---|
| OGNOrganon | $6.2B | 62% | 25.0% | 17% | 12% |
| ONCBeOne Medicines Ltd. | $5.3B | 86% | -124.4% | -46% | -112% |
| ELANElanco Animal Health Incorporated | $4.7B | 54% | -3.2% | -1% | 4% |
| JAZZJazz Pharmaceuticals | $4.3B | — | 16.8% | 8% | 35% |
| PRGOPerrigo Company plc | $4.3B | 36% | 3.9% | 1% | 6% |
| ALNYAlnylam | $3.7B | 86% | -126.0% | -83% | -107% |
| BMRNBioMarin | $3.2B | 78% | -1.7% | -1% | 1% |
| AMRXAmneal Pharmaceuticals Inc. | $3.0B | 37% | 7.9% | 3% | 9% |
| Group median | — | 62% | 1.1% | 0% | 5% |
The price
What a price has to assume.
What the price implies
reverse-DCFType today's close and see the owner-earnings growth you'd have to believe to justify it, beside what Elanco Animal Health Incorporated has delivered.
Elanco Animal Health Incorporated’s latest year runs above its own through-cycle margin — the reported figure may flatter a peak. So the tool opens on the through-cycle base, Graham’s averaging cutting both ways; clear the toggle below to read the latest year exactly as reported.
$
Through the cycle, Elanco Animal Health Incorporated earns about $212M on its 4.5% median owner-earnings margin. This year’s 6.0% margin runs above that; the reported figure may flatter a peak you'd be paying on. Normalize, below, values the price on that through-cycle figure rather than the latest year. It comes pre-checked here for that reason, the same rule that already normalizes a trough; clear it to price the year as filed.
Base
—
The assumptions
9.0% = the 4.55% 10-year Treasury (Jul 15, 2026) + 4.45 points of equity premium. The rate you require is yours to set.
Enter a price above to run it.
A dated snapshot of the price you typed, the assumptions you set, and what the page showed for them. A snapshot is never edited after it is saved. Your notebook is yours alone — the commitment states what is stored and what we will never do.
Implied by the price—
Owner-earnings growth · ’21→’25+3%/yr
Owner-earnings growth · ’16→’25+21%/yr
Owner-earnings growth · ’16→’25+21%/yr
Owner-earnings yield—
What a growth belief costs, in multiples
The growth each return requires, at your price
P/E (3-yr earnings ’23–’25)—
P/B—
Graham’s price gate—
Graham capped the multiple at 15×; Buffett and Munger let that rule go: a wonderful business can deserve 50× if the thesis holds. The gate marks the bargain-hunter's floor.
Against a high-grade bond: Graham’s yardstick bond yield%
Prefilled with the 10-year Treasury (4.55%, as of Jul 15, 2026). Edit it for today’s exact figure, or a AAA corporate yield.
Graham measured a stock against the bond you could own instead, the heart of his margin of safety. Enter a price above to weigh the owner-earnings yield against this bond.
Owner-earnings yield—
High-grade bond yield—
Margin over the bond—
Owner earnings $315M on 499M shares outstanding, per the 10-Q cover, as of 2026-05-01; net debt $3.6B. The base opens on the through-cycle figure (the latest year sits above the record’s own median, and Graham’s averaging cuts both ways); clear Normalize to use the year as filed. Net of stock comp treats option pay as the expense it is. The dials set the multiple a growth belief justifies; the price, and every dollar on this page, is yours.
Cite: Owner Scorecard, "Elanco Animal Health Incorporated (ELAN), the owner's record," https://ownerscorecard.com/c/ELAN, data as of 2026-07-09.
Manual order: ← ELA its page in the Manual ELF →
Industry order: ← EBS the Pharmaceuticals chapter ENLV →