JNJ Valuation In-Depth Quant Report

Updated on

Fundamental Valuation Report

Johnson & Johnson(JNJ:NYS)

Healthcare:Drug Manufacturers-Major

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$145.34 (USD) 09/11/2018

Weighted Valuation
$143.67 (USD)

Overall Rating
Fairly valued to slightly Overvalued by 1.1%

Valuation Models Analyst Consensus: $144.67 (USD)
(in order of importance) Discounted Cash Flow: $159.07 (USD)
Comparables: $109.90 (USD)
Valuation Methods This company is:
Cash Flow: Undervalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation

Company Overview (JNJ:NYS USD)

Price 145.34
Range 144.38 – 145.74
52 week 119.40 – 148.14
Open 145.04
Vol / Avg. 5.19M/7.28M
Mkt cap 389.69B
P/E 246.34
Div/yield 3.32/0.02
EPS 0.47
Shares 2.68B
Beta 0.59

Company Description

Johnson & Johnson is the world’s largest and most diverse healthcare company. Three divisions make up the firm: pharmaceutical, medical devices and diagnostics, and consumer. The drug and device groups represent close to 80% of sales and drive the majority of cash flows for the firm. The drug division focuses on the following therapeutic areas: immunology, oncology, neurology, pulmonary, cardiology, and metabolic diseases. The device segment focuses on orthopedics, surgery tools, vision care, and a few smaller areas. The last segment of consumer focuses on baby care, beauty, oral care, over-the-counter drugs, and women’s health. Geographically, close to half of total revenue is generated within the United States.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for JNJ:NYS

Using a discounted cash flow model we generated an intrinsic value of $159.07 (USD) for JNJ:NYS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

JNJ:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $159.07 1% 5% 1% 5%
WACC (or Ke) 6.85 $202.12 $130.48
Terminal Growth Rate 1.90 $133.16 $198.08
Tax Rate 0.33 $170.97 $147.16
Cash Flow 34,500,283,000 $150.94 $167.20
Capital Expenditures -1,125,000,000 $158.81 $159.33
Long Term Debt 26,989,000,000 $159.57 $158.56

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $109.90 (USD) for JNJ:NYS. We also generated a valuation of $137.83 (USD) using other metrics and comparables.
The comparable companies were AbbVie (ABBV:NYS), Eli Lilly (LLY:NYS), Merck & Co (MRK:NYS) and Pfizer (PFE:NYS).

Company JNJ:NYS End Date Value
Earnings/Share $0.59 (USD)
Book Value/Share $24.10 (USD)
Sales/Share $29.78 (USD)
Cash Flow/Share $8.07 (USD)
EBITDA/Share $8.87 (USD)
Price Based on Comps Adjustment Factor (%)
$35.01 (USD) -26.5
$156.78 (USD) -64.1
$137.58 (USD) 15.6
$135.06 (USD) 4.7
$166.36 (USD) 0.0
JNJ:NYS Ratios Used Average Values ABBV:NYS LLY:NYS MRK:NYS PFE:NYS
237.27 PE Ratio 59.33 19.27 0.00 147.22 11.51
5.81 PB Ratio 6.51 0.00 10.02 5.88 3.62
4.70 PS Ratio 4.62 4.01 4.74 4.85 4.87
17.34 PCF Ratio 18.30 10.92 20.30 27.12 14.85
15.17 EV to EBITDA 18.75 13.74 28.80 18.98 13.47

Multiples

Using a multiples approach we generated a valuation of  $101.46 (USD) for JNJ:NYS

Company JNJ:NYS End Date Value
Earnings/Share $0.59 (USD)
Book Value/Share $24.10 (USD)
Sales/Share $29.78 (USD)
Cash Flow/Share $8.07 (USD)
EBITDA/Share $8.87 (USD)
Price Based on Comps Adjustment Factor
$11.95 (USD) 0
$108.14 (USD) 0
$133.51 (USD) 0
$137.20 (USD) 0
$116.52 (USD) 0
Ratios Ratio Average
PE Ratio 20.25
PB Ratio 4.49
PS Ratio 4.48
PCF Ratio 16.99
EV to EBITDA 13.13

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  JNJ:NYS for the last 10 years was  4.43

We ran the Adjusted Book Value for  JNJ:NYS and generated a book value of  $24.09 (USD)
By multiplying these we get an adjusted valuation of  $106.69 (USD)

Analyst Data

In the Stockcalc database there are 6 analysts that provide a valuation for JNJ:NYS. The 6 analysts have a concensus valuation for JNJ:NYS for 2019 of $144.67 (USD).

JNJ:NYS Johnson & Johnson

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
5 2 0 4.1250 Outperform 2018-11-8

Current Price: 145.34 USD

Analyst Consensus
USD Millions 2018 2019 2020
Mean EPS 8.16 8.58 9.25
# EPS Analysts 6 6 3
Mean Revenue 81,340.90 82,868.40 86,524.20
# Revenue Analysts 5 5 3
Mean Target Price 144.67
Mean Cash Flow 9.18 10.28 11.04
Mean EBITDA 30,342.70 31,808.60 33,857.00
Mean Net Income 22,277.40 23,403.20 25,013.00
Mean Debt Outstanding 12,513.20 1,499.70 -9,812.70
Mean Tax Rate 17.40 16.60
Mean Growth Rate 6.20
Mean Capital Expenditure 3,510.30 3,713.50 3,839.40

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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