Johnson & Johnson (JNJ) Valuation
Company Profile (obtained from Google Finance): Johnson & Johnson is engaged in the research and development, manufacture and sale of a range of products in the healthcare field. Johnson & Johnson has more than 250 operating companies. The Company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. The Consumer segment includes a range of products used in the baby care, skin care, oral care, wound care and women’s healthcare fields, as well as nutritional and over-the-counter pharmaceutical products. The Pharmaceutical segment includes products in the therapeutic areas, such as anti-infective, antipsychotic, cardiovascular, contraceptive, dermatology, gastrointestinal, hematology, immunology, neurology, oncology, pain management, urology and virology. The Medical Devices and Diagnostics segment includes a range of products distributed to wholesalers, hospitals and retailers. In October 2008, the Company acquired HealthMedia, Inc. In December 2008, it acquired Omrix Biopharmaceuticals, Inc.
ModernGraham Comments: None at this time.
Defensive and Enterprising Investor Tests:
Defensive Investor – must pass at least 6 of the following 7 tests: Score = 6/7
- Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
- Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
- Earnings Stability – positive earnings per share for at least 10 straight years – PASS
- Dividend Record – has paid a dividend for at least 10 straight years – PASS
- Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
- Moderate PEmg ratio – PEmg is less than 20 – PASS
- Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL
Enterprising Investor – must pass at least 4 of the following 5 tests: Score = 5/5
- Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
- Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
- Earnings Stability – positive earnings per share for at least 5 years – PASS
- Dividend Record – currently pays a dividend – PASS
- Earnings growth – EPSmg greater than 5 years ago – PASS
Valuation Summary:
- Last updated 10/2/09
- MG Value = $98
- MG Opinion = Undervalued
- Value based on 3% Growth = $60
- Value based on 0% Growth = $35
- Market-implied growth rate = 2.99%
- Net Current Asset Value (NCAV) = $5.67
- Current Ratio = 1.78
- Price to Book Ratio = 3.56
Key Data:
Balance Sheet – 6/28/2009
- Current Assets $35,494,000,000
- Current Liabilities $19,886,000,000
- Total Debt $8,179,000,000
- Total Assets $87,438,000,000
- Intangible Assets $14,720,000,000
- Goodwill $14,152,000,000
- Total Liabilities $41,191,000,000
- Outstanding Shares 2,754,340,000
Earnings Per Share – Diluted
- 2009 (estimate) $4.38
- 2008 $4.57
- 2007 $3.63
- 2006 $3.73
- 2005 $3.35
- 2004 $2.74
- 2003 $2.40
- 2002 $2.16
- 2001 $1.84
- 2000 $1.61
- 1999 $1.39
- 1998 $1.02
Earnings Per Share – Modern Graham
- 2009 (estimate) $4.13
- 2008 $3.87
- 2007 $3.40
- 2006 $3.15
- 2005 $2.74
- 2004 $2.34
Valuation History:
- 10/2/09 – Value $97, Actual Price $59.79, Undervalued & Enterprising
- 6/28/09 – Value $100, Actual Price $56.60, Undervalued & Defensive
- 7/29/08 – Value $69, Actual Price $68.55, Fairly Valued & Defensive
- 3/10/08 – Value $66, Actual Price $61.51, Fairly Valued & Enterprising
- 8/28/06 – Value $81, Actual Price $65, Undervalued & Enterprising


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