Johnson & Johnson JNJ
What does Johnson & Johnson do?
Johnson & Johnson is a globally active healthcare group based in the US. The company researches, develops, manufactures and sells prescription drugs as well as medical technology products. Its business is divided into two segments: Innovative Medicine and MedTech.
In the Innovative Medicine segment, the focus is on therapeutic areas such as oncology, immunology, neuroscience, pulmonary hypertension, infectious diseases, and cardiovascular and metabolic diseases. Products reach patients through wholesalers, pharmacies, hospitals and healthcare professionals. MedTech comprises products for surgery, orthopedics, cardiovascular and ophthalmology, which are sold mainly to hospitals and physicians. Competitively, J&J is one of the largest diversified companies in the industry. The combination of pharmaceuticals and medical technology spreads risk more broadly than at pure drug makers, but requires high investment in research and development in both areas.
Score profile
Rank vs. Drug Manufacturers - General (15 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, Johnson & Johnson ranks below average in the group Drug Manufacturers - General (4.0/10). On growth, the company ranks below average in the group Drug Manufacturers - General (3.0/10). On valuation (higher = cheaper), the stock ranks below average in the group Drug Manufacturers - General (2.6/10). On financial strength, Johnson & Johnson ranks below average in the group Drug Manufacturers - General (3.9/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 24.1x | 16.4x | better than 10 % |
| Trailing P/E | 42.6x | 32.3x | better than 35 % |
| PEG ratio | 3.1x | 3.3x | better than 61 % |
| EV/EBITDA | 20.5x | 13.4x | better than 10 % |
| Price/sales | 6.8x | 4.4x | better than 23 % |
| Price/book | 8.3x | 6.8x | better than 32 % |
| Revenue growth | 5.9% | 5.6% | better than 57 % |
| Earnings growth | -95.9% | -5.3% | better than 4 % |
| Gross margin | 67.8% | 74.2% | better than 23 % |
| Operating margin | 25.7% | 34.3% | better than 30 % |
| Net margin | 16.2% | 15.7% | better than 57 % |
| Return on equity | 20.0% | 20.0% | better than 50 % |
| Debt/equity | 54.8% | 119.9% | better than 77 % |
| Current ratio | 1.0x | 1.4x | better than 23 % |
| Free cash flow yield | 2.7% | 4.4% | better than 17 % |
| Dividend yield | 1.9% | 2.2% | – |
| Payout ratio | 80.1% | 60.8% | – |
| Beta | 0.20 | 0.37 | – |
Valuation: what is Johnson & Johnson worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give Johnson & Johnson a model range of 150.59 USD to 242.48 USD per share.
22 analysts, average rating “Buy”, average price target 279.41 USD (−0.4%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- The success of patent-protected core drugs in oncology and immunology largely determines revenue and earnings of the pharmaceutical segment.
- New approvals and indication expansions from the in-house research pipeline secure long-term growth and offset expiring patents.
- Demand for surgeries and procedures in hospitals influences sales of MedTech products in surgery, orthopedics and cardiovascular.
Risks
- Patent expirations and the emergence of generics or biosimilars can lead to significant revenue declines for high-revenue drugs.
- Price regulation and political pressure on drug prices, especially in the US, weigh on margins and predictability.
- Product liability lawsuits and legal disputes can cause substantial provisions and payments and damage the company's image.
What to look for with Johnson & Johnson
Revenue development by segment is particularly informative because it shows whether pharmaceutical successes and the MedTech business can offset patent expirations and pricing pressure.