Johnson & Johnson (NYSE: JNJ)
Quality Value Investing Research Report | $JNJ Updated Coverage | October 2024
In this updated coverage research report, we reexamine the health care sector company Johnson & Johnson — JNJ 0.00%↑ — to see if it continues to meet Quality Value Investing’s (QVI) Real-Time Stock Picks criteria based on our checklist analysis of the business’s current wealth and the share price’s present value.
Johnson & Johnson | Company Current Wealth
Value Proposition
Johnson & Johnson is a dividend-paying large-cap stock in the health care sector’s pharmaceuticals industry. It was added to the QVI Real-Time Stock Picks on May 8, 2017, at a $100.47 cost basis per share.
Johnson & Johnson, together with its subsidiaries, researches, develops, manufactures, and sells various products in the healthcare field worldwide.
The company’s segments include Innovative Medicine and MedTech, distributing its products to wholesalers, hospitals, and retailers, as well as physicians, nurses, hospitals, eye care professionals, and clinics.
Johnson & Johnson was founded in 1886 and is based in New Brunswick, New Jersey, USA.
Economic Moat
Morningstar assigns Johnson & Johnson a wide moat rating based on its view that J&J carries one of the widest economic moats in the health care sector, supported by intellectual property in the drug and device groups and switching costs in the device segment.
QVI’s Value Proposition Elevator Pitch for JNJ
Johnson & Johnson is like owning a mutual fund of quality healthcare products but with blue chip low risk and no advisory fees.
QVI’s value proposition rating for Johnson & Johnson: Bullish.
Returns on Management
Revenue Growth and Net Profit Margin
Per the table below, Johnson & Johnson’s trailing three-year annualized revenue growth was low-single-digit positive, underperforming the S&P 500 topline growth of 16.90%. Moreover, the company’s positive revenue growth of 4.80% lagged the broader market’s +17.90% for the most recently reported twelve months.
Further down the income statement, J&J had a positive double-digit net profit margin from a 69.40% gross margin, underperforming the S&P 500’s net of 21.00% from a gross of 54.50%.
Returns on Equity and Invested Capital
Johnson & Johnson’s senior management produced a return on equity, or ROE, above QVI’s targeted threshold but lagged the S&P 500’s soaring ROE of 68.20%.
Stock buyback programs often elevate ROE. For example, J&J repurchased $1.62 billion of its shares in the first half of this year, as reported in late June 2024.
J&J’s return on invested capital, or ROIC, outperformed QVI’s threshold and the broader market’s 23.70% return. In addition, the company’s ROIC exceeded its weighted average cost of capital, or WACC, demonstrating that its senior executives are outstanding capital allocators (Source of WACC: GuruFocus).
QVI’s business fundamentals rating for Johnson & Johnson: Bullish.
Next, we’ll look at the company’s enterprise downsize risks, the stock price’s present value, including share price downside risks, and the investment thesis, each exclusive to Quality Value Investing’s premium (paying) subscribers.
Unless noted, all data presented is sourced from Charles Schwab & Co. and CNBC.com as of the intraday market on October 22, 2024, and intended for illustration only.
Disclosure: As of the date of this research report, I/we no longer hold a beneficial position in JNJ common shares in our family portfolio. I wrote this report myself, and it expresses my own opinions. I am not receiving compensation for it other than from Substack paid subscriptions. I have no business relationship with any company whose stock is mentioned in this post.
Additional Disclosure: Quality Value Investing by David J. Waldron’s primary ticker research reports are for informational purposes only. The accuracy of the data cannot be guaranteed. Narrative and analytics are impersonal, i.e., not tailored to individual needs nor intended for portfolio construction beyond his family portfolio, which is presented solely for educational purposes. David is an individual investor and author, not an investment adviser. Readers should always engage in independent research or due diligence and consider, as appropriate, consulting a fee-only certified financial planner, licensed discount broker/dealer, flat fee registered investment adviser, certified public accountant, or specialized attorney before making any investment, income tax, or estate planning decisions.
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