Johnson & Johnson Valuation – April 2019 #JNJ

Company Profile (excerpt from Reuters): Johnson & Johnson, incorporated on November 10, 1887, is a holding company. The Company and its subsidiaries are engaged in the research and development, manufacture and sale of a range of products in the healthcare field. The Company operates through three segments: Consumer, Pharmaceutical and Medical Devices. The Company’s primary focus is on products related to human health and well-being. The Company’s subsidiaries operated 119 manufacturing facilities, as of January 1, 2017. The Company’s research facilities are located in the United States, Belgium, Brazil, Canada, China, France, Germany, India, Israel, Japan, the Netherlands, Singapore, Switzerland and the United Kingdom. The Company has over 230 operating companies, which conduct business around the world.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JNJ – April 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $361,737,592,452 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.47 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 20.12% Fail
6. Moderate PEmg Ratio PEmg < 20 24.36 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.20 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.47 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.87 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.58
MG Growth Estimate 1.54%
MG Value $64.60
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $80.85
MG Value based on 0% Growth $47.40
Market Implied Growth Rate 7.93%
Current Price $135.83
% of Intrinsic Value 210.26%

 

Johnson & Johnson does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $5.06 in 2015 to an estimated $5.58 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.93% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Johnson & Johnson revealed the company was trading above its Graham Number of $65.24. The company pays a dividend of $3.54 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 24.36, which was below the industry average of 45.96, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-17.3.

Johnson & Johnson receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$17.30
Graham Number $65.24
PEmg 24.36
Current Ratio 1.47
PB Ratio 6.20
Current Dividend $3.54
Dividend Yield 2.61%
Number of Consecutive Years of Dividend Growth 20

 

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $46,033,000,000
Total Current Liabilities $31,230,000,000
Long-Term Debt $27,684,000,000
Total Assets $152,954,000,000
Intangible Assets $78,064,000,000
Total Liabilities $93,202,000,000
Shares Outstanding (Diluted Average) 2,726,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.49
Dec2018 $5.61
Dec2017 $0.47
Dec2016 $5.93
Dec2015 $5.48
Dec2014 $5.70
Dec2013 $4.81
Dec2012 $3.86
Dec2011 $3.49
Dec2010 $4.78
Dec2009 $4.40
Dec2008 $4.57
Dec2007 $3.63
Dec2006 $3.73
Dec2005 $3.35
Dec2004 $2.74
Dec2003 $2.29
Dec2002 $2.16
Dec2001 $1.84
Dec2000 $1.61
Dec1999 $1.39

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.58
Dec2018 $4.29
Dec2017 $3.91
Dec2016 $5.48
Dec2015 $5.06
Dec2014 $4.74
Dec2013 $4.26
Dec2012 $4.06
Dec2011 $4.17
Dec2010 $4.41
Dec2009 $4.13
Dec2008 $3.87
Dec2007 $3.39
Dec2006 $3.13
Dec2005 $2.72
Dec2004 $2.31
Dec2003 $2.01

Recommended Reading:

Other ModernGraham posts about the company

Johnson & Johnson Valuation – November 2018 $JNJ
Johnson & Johnson Valuation – February 2018 $JNJ
4 Best Stocks for Value Investors This Week – 1/28/17
Best Dividend Paying Stocks for Dividend Growth Investors – January 2017
Johnson & Johnson Valuation – January 2017 $JNJ

Other ModernGraham posts about related companies

Bristol-Myers Squibb Co Valuation – April 2019 #BMY
Biogen Inc Valuation – March 2019 #BIIB
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Celgene Corp Valuation – March 2019 #CELG
Amgen Inc Valuation – March 2019 #AMGN
AbbVie Inc Valuation – March 2019 #ABBV
Allergan PLC Valuation – February 2019 $AGN
Incyte Corp Valuation – February 2019 $INCY
Regeneron Pharmaceuticals Inc Valuation – February 2019 $REGN
Alexion Pharmaceuticals Inc Valuation – February 2019 $ALXN

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Johnson & Johnson Valuation – November 2018 $JNJ

Company Profile (excerpt from Reuters): Johnson & Johnson, incorporated on November 10, 1887, is a holding company. The Company and its subsidiaries are engaged in the research and development, manufacture and sale of a range of products in the healthcare field. The Company operates through three segments: Consumer, Pharmaceutical and Medical Devices. The Company’s primary focus is on products related to human health and well-being. The Company’s subsidiaries operated 119 manufacturing facilities, as of January 1, 2017. The Company’s research facilities are located in the United States, Belgium, Brazil, Canada, China, France, Germany, India, Israel, Japan, the Netherlands, Singapore, Switzerland and the United Kingdom. The Company has over 230 operating companies, which conduct business around the world.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JNJ – November 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $391,541,961,784 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.72 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 6.55% Fail
6. Moderate PEmg Ratio PEmg < 20 30.49 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.16 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.72 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.49 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.79
MG Growth Estimate 0.16%
MG Value $42.22
Opinion Overvalued
MG Grade B
MG Value based on 3% Growth $69.44
MG Value based on 0% Growth $40.70
Market Implied Growth Rate 10.99%
Current Price $145.99
% of Intrinsic Value 345.79%

Johnson & Johnson is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $4.74 in 2014 to an estimated $4.79 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.99% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Johnson & Johnson revealed the company was trading above its Graham Number of $59.86. The company pays a dividend of $3.32 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 30.49, which was below the industry average of 55.8, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-16.09.

Johnson & Johnson performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$16.09
Graham Number $59.86
PEmg 30.49
Current Ratio 1.72
PB Ratio 6.16
Current Dividend $3.32
Dividend Yield 2.27%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $47,194,000,000
Total Current Liabilities $27,437,000,000
Long-Term Debt $29,480,000,000
Total Assets $155,703,000,000
Intangible Assets $79,339,000,000
Total Liabilities $91,077,000,000
Shares Outstanding (Diluted Average) 2,727,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.10
Dec2017 $0.47
Dec2016 $5.93
Dec2015 $5.48
Dec2014 $5.70
Dec2013 $4.81
Dec2012 $3.86
Dec2011 $3.49
Dec2010 $4.78
Dec2009 $4.40
Dec2008 $4.57
Dec2007 $3.63
Dec2006 $3.73
Dec2005 $3.35
Dec2004 $2.74
Dec2003 $2.29
Dec2002 $2.16
Dec2001 $1.84
Dec2000 $1.61
Dec1999 $1.39
Dec1998 $1.06

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.79
Dec2017 $3.91
Dec2016 $5.48
Dec2015 $5.06
Dec2014 $4.74
Dec2013 $4.26
Dec2012 $4.06
Dec2011 $4.17
Dec2010 $4.41
Dec2009 $4.13
Dec2008 $3.87
Dec2007 $3.39
Dec2006 $3.13
Dec2005 $2.72
Dec2004 $2.31
Dec2003 $2.01
Dec2002 $1.79

Recommended Reading:

Other ModernGraham posts about the company

Johnson & Johnson Valuation – February 2018 $JNJ
4 Best Stocks for Value Investors This Week – 1/28/17
Best Dividend Paying Stocks for Dividend Growth Investors – January 2017
Johnson & Johnson Valuation – January 2017 $JNJ
Best Dividend Paying Stocks for Dividend Growth Investors – December 2016

Other ModernGraham posts about related companies

Inter Parfums Inc Valuation – July 2018 $IPAR
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Avon Products Inc Valuation – June 2018 $AVP
Colgate-Palmolive Co Valuation – June 2018 $CL
Coty Inc Valuation – May 2018 $COTY
Church & Dwight Co Inc Valuation – April 2018 $CHD
Kimberly-Clark Corp Valuation – March 2018 $KMB
International Flavors & Fragrances Inc Valuation – March 2018 $IFF
Signet Jewelers Ltd Valuation – March 2018 $SIG
Estee Lauder Companies Inc Valuation – February 2018 $EL

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Johnson & Johnson Valuation – February 2018 $JNJ

Company Profile (obtained from Marketwatch): Johnson & Johnson is an investment holding company with interests in health care products. It engages in research and development, manufacture and sale of personal care hygienic products, pharmaceuticals and surgical equipment. The company operates through the following business segments: Consumer, Pharmaceutical and Medical Devices. The Consumer segment includes products used in the baby care, skin care, oral care, wound care and women’s health care fields, as well as nutritional and over-the-counter pharmaceutical products, and wellness and prevention platforms. Its baby care franchise includes the JOHNSON’S Baby line of products. The Pharmaceutical segment includes products in the anti-infective, antipsychotic, contraceptive, gastrointestinal, hematology, immunology, infectious diseases, neurology, oncology, pain management, thrombosis and vaccines. The Medical Devices segment includes products distributed to wholesalers, hospitals and retailers, used principally in the professional fields by physicians, nurses, hospitals, and clinics. It include products to treat cardiovascular disease; orthopaedic and neurological products; blood glucose monitoring and insulin delivery products; general surgery, biosurgical, and energy products; professional diagnostic products; infection prevention products; and disposable contact lenses. Johnson & Johnson was founded by Robert Wood Johnson I, James Wood Johnson and Edward Mead Johnson Sr. in 1886 and is headquartered in New Brunswick, NJ.

JNJ Chart

JNJ data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JNJ – February 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $354,674,411,451 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.41 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 13.81% Fail
6. Moderate PEmg Ratio PEmg < 20 25.91 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.02 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.41 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.44 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.10
MG Growth Estimate 1.13%
MG Value $54.82
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $73.88
MG Value based on 0% Growth $43.31
Market Implied Growth Rate 8.70%
Current Price $132.02
% of Intrinsic Value 240.84%

Johnson & Johnson does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $4.74 in 2014 to an estimated $5.1 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.7% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Johnson & Johnson revealed the company was trading above its Graham Number of $63.59. The company pays a dividend of $3.32 per share, for a yield of 2.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 25.91, which was below the industry average of 28.67, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-19.71.

Johnson & Johnson receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$19.71
Graham Number $63.59
PEmg 25.91
Current Ratio 1.41
PB Ratio 6.02
Current Dividend $3.32
Dividend Yield 2.51%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $43,088,000,000
Total Current Liabilities $30,537,000,000
Long-Term Debt $30,675,000,000
Total Assets $157,303,000,000
Intangible Assets $85,134,000,000
Total Liabilities $97,143,000,000
Shares Outstanding (Diluted Average) 2,742,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.02
Dec2017 $0.47
Dec2016 $5.93
Dec2015 $5.48
Dec2014 $5.70
Dec2013 $4.81
Dec2012 $3.86
Dec2011 $3.49
Dec2010 $4.78
Dec2009 $4.40
Dec2008 $4.57
Dec2007 $3.63
Dec2006 $3.73
Dec2005 $3.35
Dec2004 $2.74
Dec2003 $2.29
Dec2002 $2.16
Dec2001 $1.84
Dec2000 $1.61
Dec1999 $1.39
Dec1998 $1.06

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.10
Dec2017 $3.91
Dec2016 $5.48
Dec2015 $5.06
Dec2014 $4.74
Dec2013 $4.26
Dec2012 $4.06
Dec2011 $4.17
Dec2010 $4.41
Dec2009 $4.13
Dec2008 $3.87
Dec2007 $3.39
Dec2006 $3.13
Dec2005 $2.72
Dec2004 $2.31
Dec2003 $2.01
Dec2002 $1.79

Recommended Reading:

Other ModernGraham posts about the company

4 Best Stocks for Value Investors This Week – 1/28/17
Best Dividend Paying Stocks for Dividend Growth Investors – January 2017
Johnson & Johnson Valuation – January 2017 $JNJ
Best Dividend Paying Stocks for Dividend Growth Investors – December 2016
Johnson & Johnson Valuation – August 2016 $JNJ

Other ModernGraham posts about related companies

Bristol-Myers Squibb Co Valuation – September 2017 $BMY
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Depomed Inc Valuation – Initial Coverage $DEPO
Endo International PLC Valuation – July 2017 $ENDP
Biogen Inc Valuation – July 2017 $BIIB
Mylan NV Valuation – March 2017 $MYL
Amgen Inc Valuation – March 2017 $AMGN
Celgene Corporation Valuation – March 2017 $CELG
Ligand Pharmaceuticals Inc Valuation – Initial Coverage $LGND
Pfizer Inc Valuation – March 2017 $PFE

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Johnson & Johnson Valuation – January 2017 $JNJ

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – January 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Johnson & Johnson (JNJ) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Johnson & Johnson is a holding company, which is engaged in the research and development, manufacture and sale of a range of products in the healthcare field. The Company’s segments include Consumer, Pharmaceutical and Medical Devices. The Consumer segment includes a range of products used in the baby care, oral care, skin care, over-the-counter pharmaceutical, women’s health and wound care markets. The Pharmaceutical segment is focused on over five therapeutic areas, including immunology, infectious diseases, neuroscience, oncology, and cardiovascular and metabolic diseases. The Medical Devices segment includes a range of products used in the orthopedic, surgery, cardiovascular, diabetes care and vision care fields. Its research facilities are located in the United States, Belgium, Brazil, Canada, China, France, Germany, India, Israel, Japan, the Netherlands, Singapore, Switzerland and the United Kingdom.

JNJ Chart

JNJ data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JNJ – January 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $311,718,494,701 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.73 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 36.67% Pass
6. Moderate PEmg Ratio PEmg < 20 20.79 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.39 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.73 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.59 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $5.51
MG Growth Estimate 5.35%
MG Value $105.81
Opinion Fairly Valued
MG Grade B+
MG Value based on 3% Growth $79.94
MG Value based on 0% Growth $46.86
Market Implied Growth Rate 6.14%
Current Price $114.60
% of Intrinsic Value 108.30%

Johnson & Johnson is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $4.06 in 2012 to an estimated $5.51 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 6.14% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Johnson & Johnson revealed the company was trading above its Graham Number of $60.27. The company pays a dividend of $3.1 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.79, which was below the industry average of 28.95, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-1.54.

Johnson & Johnson performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$1.54
Graham Number $60.27
PEmg 20.79
Current Ratio 2.73
PB Ratio 4.39
Current Dividend $3.10
Dividend Yield 2.71%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $63,319,000,000
Total Current Liabilities $23,230,000,000
Long-Term Debt $23,546,000,000
Total Assets $140,369,000,000
Intangible Assets $50,813,000,000
Total Liabilities $67,600,000,000
Shares Outstanding (Diluted Average) 2,785,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.04
Dec2015 $5.48
Dec2014 $5.70
Dec2013 $4.81
Dec2012 $3.86
Dec2011 $3.49
Dec2010 $4.78
Dec2009 $4.40
Dec2008 $4.57
Dec2007 $3.63
Dec2006 $3.73
Dec2005 $3.35
Dec2004 $2.74
Dec2003 $2.29
Dec2002 $2.16
Dec2001 $1.84
Dec2000 $1.61
Dec1999 $1.39
Dec1998 $1.06
Dec1997 $1.21
Dec1996 $1.09

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.51
Dec2015 $5.06
Dec2014 $4.74
Dec2013 $4.26
Dec2012 $4.06
Dec2011 $4.17
Dec2010 $4.41
Dec2009 $4.13
Dec2008 $3.87
Dec2007 $3.39
Dec2006 $3.13
Dec2005 $2.72
Dec2004 $2.31
Dec2003 $2.01
Dec2002 $1.79
Dec2001 $1.54
Dec2000 $1.35

Recommended Reading:

Other ModernGraham posts about the company

Johnson & Johnson Valuation – January 2016 Update $JNJ
Johnson & Johnson Analysis – September 2015 Update $JNJ
Johnson & Johnson Analysis – June 2015 Quarterly Update $JNJ
28 Companies in the Spotlight This Week – 2/28/15
Johnson and Johnson Company Quarterly Valuation – February 2015 $JNJ

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Regeneron Pharmaceuticals Inc Valuation – November 2016 $REGN
Merck & Co Inc Valuation – August 2016 $MRK
Mallinckrodt PLC Valuation – August 2016 $MNK
Vertex Pharmaceuticals Inc Valuation – August 2016 $VRTX
Amgen Inc Valuation – August 2016 $AMGN
Pfizer Inc Valuation – August 2016 $PFE

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Johnson & Johnson Valuation – August 2016 $JNJ

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – July 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Johnson & Johnson (JNJ) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Johnson & Johnson is a holding company, which is engaged in the research and development, manufacture and sale of a range of products in the healthcare field. The Company’s segments include Consumer, Pharmaceutical and Medical Devices. The Consumer segment includes a range of products used in the baby care, oral care, skin care, over-the-counter pharmaceutical, women’s health and wound care markets. The Pharmaceutical segment is focused on over five therapeutic areas, including immunology, infectious diseases, neuroscience, oncology, and cardiovascular and metabolic diseases. The Medical Devices segment includes a range of products used in the orthopedic, surgery, cardiovascular, diabetes care and vision care fields. Its research facilities are located in the United States, Belgium, Brazil, Canada, China, France, Germany, India, Israel, Japan, the Netherlands, Singapore, Switzerland and the United Kingdom.

chart (49)

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JNJ – August 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $333,138,162,455 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.08 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 36.43% Pass
6. Moderate PEmg Ratio PEmg < 20 22.22 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.72 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.08 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.55 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

JNJ value chart August 2016

EPSmg $5.50
MG Growth Estimate 5.31%
MG Value $105.21
Opinion Overvalued
MG Grade B
MG Value based on 3% Growth $79.80
MG Value based on 0% Growth $46.78
Market Implied Growth Rate 6.86%
Current Price $122.31
% of Intrinsic Value 116.25%

Johnson & Johnson is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $4.06 in 2012 to an estimated $5.5 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.86% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Johnson & Johnson revealed the company was trading above its Graham Number of $59.83. The company pays a dividend of $3.05 per share, for a yield of 2.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 22.22, which was below the industry average of 38.69, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.38.

Johnson & Johnson performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

JNJ charts August 2016

Net Current Asset Value (NCAV) -$0.38
Graham Number $59.83
PEmg 22.22
Current Ratio 3.08
PB Ratio 4.72
Current Dividend $3.05
Dividend Yield 2.49%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Total Current Assets $66,291,000,000
Total Current Liabilities $21,536,000,000
Long-Term Debt $24,535,000,000
Total Assets $139,814,000,000
Intangible Assets $47,798,000,000
Total Liabilities $67,341,000,000
Shares Outstanding (Diluted Average) 2,794,200,000

Earnings Per Share History

Next Fiscal Year Estimate $6.01
Dec2015 $5.48
Dec2014 $5.70
Dec2013 $4.81
Dec2012 $3.86
Dec2011 $3.49
Dec2010 $4.78
Dec2009 $4.40
Dec2008 $4.57
Dec2007 $3.63
Dec2006 $3.73
Dec2005 $3.35
Dec2004 $2.74
Dec2003 $2.29
Dec2002 $2.16
Dec2001 $1.84
Dec2000 $1.61
Dec1999 $1.39
Dec1998 $1.06
Dec1997 $1.21
Dec1996 $1.09

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $5.50
Dec2015 $5.06
Dec2014 $4.74
Dec2013 $4.26
Dec2012 $4.06
Dec2011 $4.17
Dec2010 $4.41
Dec2009 $4.13
Dec2008 $3.87
Dec2007 $3.39
Dec2006 $3.13
Dec2005 $2.72
Dec2004 $2.31
Dec2003 $2.01
Dec2002 $1.79
Dec2001 $1.54
Dec2000 $1.35

Recommended Reading:

Other ModernGraham posts about the company

Johnson & Johnson Valuation – January 2016 Update $JNJ
Johnson & Johnson Analysis – September 2015 Update $JNJ
Johnson & Johnson Analysis – June 2015 Quarterly Update $JNJ
28 Companies in the Spotlight This Week – 2/28/15
Johnson and Johnson Company Quarterly Valuation – February 2015 $JNJ

Other ModernGraham posts about related companies

Regeneron Pharmaceuticals Inc Valuation – August 2016 $REGN
AmerisourceBergen Corp Valuation – July 2016 $ABC
Perrigo Co PLC Valuation – July 2016 $PRGO
AbbVie Inc Valuation – July 2016 $ABBV
Gilead Sciences Inc Valuation – July 2016 $GILD
Eli Lilly and Company Valuation – July 2016 $LLY
Zoetis Inc Valuation – June 2016 $ZTS
Merck & Co Inc Valuation – March 2016 $MRK
Bristol-Myers Squibb Company Valuation – February 2016 $BMY
Amgen Inc Valuation – February 2016 $AMGN

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Johnson & Johnson Valuation – January 2016 Update $JNJ

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – November 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Johnson & Johnson (JNJ) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Johnson & Johnson is a holding company. The Company is engaged in the research and development, manufacture and sale of a range of products in the health care field. The Company has more than 265 operating companies conducting business around the world. The Company’s primary focus is products related to human health and well-being. The Company is organized into three business segments: Consumer, Pharmaceutical and Medical Devices. The Company’s subsidiaries operate 134 manufacturing facilities occupying approximately 21.5 million square feet of floor space. The Company’s research facilities are located in the United States, Belgium, Brazil, Canada, China, France, Germany, India, Israel, Japan, the Netherlands, Singapore, Switzerland and the United Kingdom.

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of JNJ – January 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $272,482,042,311 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.51 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 36.13% Pass
6. Moderate PEmg Ratio PEmg < 20 19.10 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.85 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.51 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.37 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

JNJ value Chart January 2016

EPSmg $5.14
MG Growth Estimate 3.49%
MG Value $79.55
Opinion Overvalued
MG Value based on 3% Growth $74.52
MG Value based on 0% Growth $43.68
Market Implied Growth Rate 5.30%
Current Price $98.16
% of Intrinsic Value 123.39%

Johnson & Johnson qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor is only initially concerned with the high PB ratio.  The Enterprising Investor has no initial concerns.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $4.17 in 2011 to an estimated $5.14 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 5.3% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Johnson & Johnson (JNJ)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

JNJ Charts January 2016

Net Current Asset Value (NCAV) $0.63
Graham Number $57.74
PEmg 19.10
Current Ratio 2.51
PB Ratio 3.85
Dividend Yield 2.95%
Number of Consecutive Years of Dividend Growth 20

 

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Sep15
Total Current Assets $63,494,000,000
Total Current Liabilities $25,260,000,000
Long-Term Debt $14,073,000,000
Total Assets $133,266,000,000
Intangible Assets $47,267,000,000
Total Liabilities $61,712,000,000
Shares Outstanding (Diluted Average) 2,807,200,000

Earnings Per Share History

Next Fiscal Year Estimate $5.73
Dec14 $5.70
Dec13 $4.81
Dec12 $3.86
Dec11 $3.49
Dec10 $4.78
Dec09 $4.40
Dec08 $4.57
Dec07 $3.63
Dec06 $3.73
Dec05 $3.35
Dec04 $2.74
Dec03 $2.29
Dec02 $2.16
Dec01 $1.84
Dec00 $1.61
Dec99 $1.39
Dec98 $1.06
Dec97 $1.21
Dec96 $1.09

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $5.14
Dec14 $4.74
Dec13 $4.26
Dec12 $4.06
Dec11 $4.17
Dec10 $4.41
Dec09 $4.13
Dec08 $3.87
Dec07 $3.39
Dec06 $3.13
Dec05 $2.72
Dec04 $2.31
Dec03 $2.01
Dec02 $1.79
Dec01 $1.54
Dec00 $1.35
Dec99 $1.13

Recommended Reading:

Other ModernGraham posts about the company

Johnson & Johnson Analysis – September 2015 Update $JNJ
Johnson & Johnson Analysis – June 2015 Quarterly Update $JNJ
28 Companies in the Spotlight This Week – 2/28/15
Johnson and Johnson Company Quarterly Valuation – February 2015 $JNJ
22 Companies in the Spotlight This Week – 11/29/14

Other ModernGraham posts about related companies

Mylan NV Valuation – January 2016 Update $MYL
Celgene Corp Valuation – December 2015 Update $CELG
Merck & Co Valuation – November 2015 Update $MRK
Zoetis Inc. Valuation – October 2015 Update $ZTS
Biogen Inc. Valuation – October 2015 Update $BIIB
Perrigo Company PLC Analysis – October 2015 Update $PRGO
Amgen Inc. Analysis – September 2015 Update $AMGN
Pfizer Inc Analysis – September 2015 Update $PFE
Johnson & Johnson Analysis – September 2015 Update $JNJ
Celgene Corporation Analysis – September 2015 Update $CELG

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Johnson & Johnson Analysis – September 2015 Update $JNJ

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – August 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Johnson & Johnson (JNJ) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Johnson & Johnson is a holding company. The Company is engaged in the research and development, manufacture and sale of a range of products in the health care field. The Company has more than 265 operating companies conducting business around the world. The Company’s primary focus is products related to human health and well-being. The Company is organized into three business segments: Consumer, Pharmaceutical and Medical Devices. The Company’s subsidiaries operate 134 manufacturing facilities occupying approximately 21.5 million square feet of floor space. The Company’s research facilities are located in the United States, Belgium, Brazil, Canada, China, France, Germany, India, Israel, Japan, the Netherlands, Singapore, Switzerland and the United Kingdom.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of JNJ – August 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end Pass
6. Moderate PEmg Ratio PEmg < 20 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $5.18
MG Growth Estimate 3.65%
MG Value $81.84
Opinion Overvalued
MG Value based on 3% Growth $75.15
MG Value based on 0% Growth $44.05
Market Implied Growth Rate 4.73%
Current Price $93.10
% of Intrinsic Value 113.76%

Johnson & Johnson qualifies for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor is only concerned with the high PB ratio while the Enterprising Investor has no initial concerns.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $4.17 in 2011 to an estimated $5.18 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 4.73% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Johnson & Johnson (JNJ)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

JNJ Charts August 2015

Net Current Asset Value (NCAV) $0.03
Graham Number $57.75
PEmg 17.98
Current Ratio 2.49
PB Ratio 3.68
Dividend Yield 3.06%
Number of Consecutive Years of Dividend Growth 20

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $61,001,000,000
Total Current Liabilities $24,512,000,000
Long-Term Debt $14,085,000,000
Total Assets $132,036,000,000
Intangible Assets $48,510,000,000
Total Liabilities $60,905,000,000
Shares Outstanding (Diluted Average) 2,812,000,000

Earnings Per Share History

Next Fiscal Year Estimate $5.86
Dec14 $5.70
Dec13 $4.81
Dec12 $3.86
Dec11 $3.49
Dec10 $4.78
Dec09 $4.40
Dec08 $4.57
Dec07 $3.63
Dec06 $3.73
Dec05 $3.35
Dec04 $2.74
Dec03 $2.29
Dec02 $2.16
Dec01 $1.84
Dec00 $1.61
Dec99 $1.39
Dec98 $1.06
Dec97 $1.21
Dec96 $1.09
Dec95 $0.93

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $5.18
Dec14 $4.74
Dec13 $4.26
Dec12 $4.06
Dec11 $4.17
Dec10 $4.41
Dec09 $4.13
Dec08 $3.87
Dec07 $3.39
Dec06 $3.13
Dec05 $2.72
Dec04 $2.31
Dec03 $2.01
Dec02 $1.79
Dec01 $1.54
Dec00 $1.35
Dec99 $1.19

Recommended Reading:

Other ModernGraham posts about the company

Johnson & Johnson Analysis – June 2015 Quarterly Update $JNJ
28 Companies in the Spotlight This Week – 2/28/15
Johnson and Johnson Company Quarterly Valuation – February 2015 $JNJ
22 Companies in the Spotlight This Week – 11/29/14
Johnson & Johnson Quarterly Valuation – November 2014 $JNJ

Other ModernGraham posts about related companies

Celgene Corporation Analysis – September 2015 Update $CELG
Allergan PLC Analysis – August 2015 Update $AGN
The Best Companies of the Pharmaceuticals Industry – August 2015
Alexion Pharmaceuticals Inc. Analysis – August 2015 Update $ALXN
Akorn Inc. Analysis – Initial Coverage $AKRX
Zoetis Inc. Analysis – July 2015 Update $ZTS
Mallinckrodt PLC Analysis – Initial Coverage $MNK
Biogen IDEC Inc. Analysis – July 2015 Update $BIIB
Vertex Pharmaceuticals Analysis – July 2015 Update $VRTX
Perrigo Company Analysis – July 2015 Update $PRGO

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Johnson & Johnson Analysis – June 2015 Quarterly Update $JNJ

500px-JohnsonandJohnsonLogo.svgA lot of investors and analysts considering Johnson & Johnson (JNJ) are focused primarily on qualitative speculation about the company’s prospects. For example, Seeking Alpha contributor Eli Inkrot looks primarily at dividend growth prospects for the company while Alexander Poulos views the company’s exposure to the healthcare sector as an investment opportunity. However, it is critical when analyzing Akamai to consider the company’s intrinsic value in relation to its price.

In fact, Benjamin Graham, the father of value investing, taught that the most important aspect to consider is whether a company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits. Here’s a look at how the company fares in the ModernGraham valuation model.

The model is inspired by the teachings of Benjamin Graham and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using the ModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

JNJ Chart

JNJ data by YCharts

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Defensive Investor – Must pass at least 6 of the following 7 tests: Score = 6/7

  1. Adequate Size of Enterprise – Market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – Current ratio greater than 2 – PASS
  3. Earnings Stability – Positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – Has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – Earnings per share has increased by at least 1/3 over the last 10 years, using 3-year averages at the beginning and end of the period – PASS
  6. Moderate PEmg (price over normalized earnings) Ratio – PEmg is less than 20 – PASS
  7. 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 or be suitable for a Defensive Investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – Current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt-to-Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – Positive earnings per share for at least 5 years – PASS
  4. Dividend Record – Currently pays a dividend – PASS
  5. Earnings Growth – EPSmg greater than that 5 years ago – PASS

Valuation Summary

Key Data

Recent Price $100.12
MG Value $85.77
MG Opinion Overvalued
Value Based on 3% Growth $76.21
Value Based on 0% Growth $44.68
Market Implied Growth Rate 5.27%
NCAV -$0.89
PEmg 19.05
Current Ratio 2.44
PB Ratio 4.17

Balance Sheet – March 2015

Current Assets $58,192,000,000
Current Liabilities $23,836,000,000
Total Debt $14,938,000,000
Total Assets $128,590,000,000
Intangible Assets $48,370,000,000
Total Liabilities $60,712,000,000
Outstanding Shares 2,826,000,000

Earnings Per Share

2015 (estimate) $6.08
2014 $5.70
2013 $4.81
2012 $3.86
2011 $3.49
2010 $4.78
2009 $4.40
2008 $4.57
2007 $3.63
2006 $3.73
2005 $3.46

Earnings Per Share – ModernGraham

2015 (estimate) $5.26
2014 $4.74
2013 $4.26
2012 $4.06
2011 $4.17
2010 $4.41

Dividend History

JNJ Dividend Chart

JNJ Dividend data by YCharts

Conclusion

Johnson & Johnson passes the initial requirements of both the Enterprising Investor and the more conservative Defensive Investor. The Defensive Investor’s only initial concern is the high PB ratio while the Enterprising Investor has no initial concerns. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has seen its EPSmg (normalized earnings) rise from $4.17 in 2011 to an estimated $5.26 for 2015. This level of earnings growth does not support the market’s implied estimate for 5.27% annual growth over the next 7-10 years.

In fact, the recent earnings growth has averaged around 5.21% per year, but as a safety margin, the ModernGraham valuation model reduces the expected future growth rate slightly in order to account for the possibility in a downturn in the business. Thus, the model returns an estimate of intrinsic value falling below the market’s price, indicating that Johnson & Johnson is overvalued at the present time.

Disclaimer:  The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

[/level-mg-stocks-screens-subscriber]

Johnson and Johnson Company Quarterly Valuation – February 2015 $JNJ

Johnson & Johnson is suitable for the Enterprising Investor, but not the more conservative Defensive Investor, who is concerned with the insufficient earnings growth over the last ten years, as well as the high PEmg and PB ratios. The Enterprising Investor, on the other hand, has no initial concerns. As a result, the Enterprising Investor should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $4.41 in 2010 to only an estimated $4.74 for 2014. This demonstrated growth does not support the market’s implied estimate of 6.6%. In fact, historically demonstrated growth has been only 1.47% per year. As a result, the ModernGraham valuation model returns an estimate of intrinsic value below the market price at this time, and the company appears to be overvalued by the market.

Read the full valuation on Seeking Alpha!

JNJ Chart

JNJ data by YCharts

Disclaimer:  The author did not hold a position in Johnson & Johnson (JNJ) at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Johnson & Johnson Quarterly Valuation – November 2014 $JNJ

500px-JohnsonandJohnsonLogo.svgJohnson & Johnson is suitable for the Enterprising Investor but not the Defensive Investor, who is concerned with the high PEmg and PB ratios. The Enterprising Investor, on the other hand, has no initial concerns with the company. As a result, the Enterprising Investor should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $4.41 in 2010 to only an estimated $4.81 for 2014. This demonstrated growth does not support the market’s implied estimate of 6.87%. In fact, the demonstrated growth over the last several years is only 1.79% per year. The company would have to see a significant change in its level of growth in order to meet the market’s estimated growth level. As a result, the ModernGraham valuation model returns an estimate of intrinsic value below the market price at this time, and the company appears to be overvalued by the market.

Be sure to check out previous ModernGraham valuations of Johnson & Johnsonfor better perspective.

Read the full valuation on Seeking Alpha!

JNJ Chart

JNJ data by YCharts

Disclaimer:  The author did not hold a position in Johnson & Johnson (JNJ) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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