NYSE:JNJ: good value for what you're paying.

Last update: May 28, 2024

Uncover the hidden value in JOHNSON & JOHNSON (NYSE:JNJ) as our stock screening tool recommends it as an undervalued choice. NYSE:JNJ maintains a robust financial position and offers an attractive pricing perspective. Let's dig deeper into the analysis.

How We Gauge Valuation for NYSE:JNJ

ChartMill assigns a proprietary Valuation Rating to each stock. The score is computed by evaluating various valuation aspects, like price to earnings and free cash flow, both absolutely as relative to the market and industry. NYSE:JNJ was assigned a score of 7 for valuation:

Based on the Price/Earnings ratio, JNJ is valued cheaply inside the industry as 88.14% of the companies are valued more expensively.
JNJ's Price/Earnings ratio indicates a rather cheap valuation when compared to the S&P500 average which is at 28.27.
Based on the Price/Forward Earnings ratio, JNJ is valued cheaply inside the industry as 82.99% of the companies are valued more expensively.
The average S&P500 Price/Forward Earnings ratio is at 20.18. JNJ is valued slightly cheaper when compared to this.
Based on the Enterprise Value to EBITDA ratio, JNJ is valued cheaper than 85.57% of the companies in the same industry.
JNJ's Price/Free Cash Flow ratio is rather cheap when compared to the industry. JNJ is cheaper than 84.54% of the companies in the same industry.
JNJ has an outstanding profitability rating, which may justify a higher PE ratio.

Exploring NYSE:JNJ's Profitability

ChartMill employs its own Profitability Rating system for stock evaluation. This score, ranging from 0 to 10, is derived from an analysis of diverse profitability metrics and margins. In the case of NYSE:JNJ, the assigned 8 is noteworthy for profitability:

With an excellent Return On Assets value of 22.37%, JNJ belongs to the best of the industry, outperforming 97.94% of the companies in the same industry.
JNJ has a Return On Equity of 54.95%. This is amongst the best in the industry. JNJ outperforms 97.42% of its industry peers.
Looking at the Return On Invested Capital, with a value of 16.20%, JNJ belongs to the top of the industry, outperforming 92.78% of the companies in the same industry.
The last Return On Invested Capital (16.20%) for JNJ is above the 3 year average (14.68%), which is a sign of increasing profitability.
JNJ's Profit Margin of 44.92% is amongst the best of the industry. JNJ outperforms 96.91% of its industry peers.
In the last couple of years the Profit Margin of JNJ has grown nicely.
JNJ has a better Operating Margin (28.32%) than 93.81% of its industry peers.
JNJ's Operating Margin has improved in the last couple of years.
Looking at the Gross Margin, with a value of 69.57%, JNJ is in the better half of the industry, outperforming 72.68% of the companies in the same industry.

Looking at the Health

To gauge a stock's financial health, ChartMill utilizes a Health Rating on a scale of 0 to 10. This comprehensive evaluation encompasses liquidity and solvency, both in absolute terms and in comparison to industry peers. NYSE:JNJ has earned a 8 out of 10:

An Altman-Z score of 4.35 indicates that JNJ is not in any danger for bankruptcy at the moment.
The Altman-Z score of JNJ (4.35) is better than 80.93% of its industry peers.
The Debt to FCF ratio of JNJ is 1.80, which is an excellent value as it means it would take JNJ, only 1.80 years of fcf income to pay off all of its debts.
Looking at the Debt to FCF ratio, with a value of 1.80, JNJ belongs to the top of the industry, outperforming 93.81% of the companies in the same industry.
JNJ has a Debt/Equity ratio of 0.45. This is a healthy value indicating a solid balance between debt and equity.
Although JNJ does not score too well on debt/equity it has very limited outstanding debt, which is well covered by the FCF. We will not put too much weight on the debt/equity number as it may be because of low equity, which could be a consequence of a share buyback program for instance. This needs to be investigated.
The current and quick ratio evaluation for JNJ is rather negative, while it does have excellent solvency and profitability. These ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.

Evaluating Growth: NYSE:JNJ

ChartMill assigns a Growth Rating to each stock, ranging from 0 to 10. This rating is determined by analyzing different growth elements, including EPS and revenue growth, spanning both historical and future figures. In the case of NYSE:JNJ, the assigned 4 reflects its growth potential:

Looking at the last year, JNJ shows a quite strong growth in Revenue. The Revenue has grown by 10.57% in the last year.
When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.

Our Decent Value screener lists more Decent Value stocks and is updated daily.

For an up to date full fundamental analysis you can check the fundamental report of JNJ

Disclaimer

Important Note: The content of this article is not intended as trading advice. It is essential to perform your own analysis and exercise caution when making trading decisions. The article presents observations created by automated analysis but does not guarantee any trading or investment outcomes. Always trade responsibly and make independent judgments.