Johnson & Johnson (NYSE: JNJ)

Sector: Healthcare Industry: Drug Manufacturers - General CIK: 0000200406
Market Cap 656.09 Bn
P/B 11.60
P/E 49.20
P/S 10.65
ROIC (Qtr) 12.68
Div Yield % 1.45
Rev 1y % (Qtr) 6.77
Total Debt (Qtr) 45.80 Bn
Debt/Equity (Qtr) 0.58

About

Johnson & Johnson (JNJ), a multinational healthcare company, has been a prominent player in the industry for over a century. The company's main business segments include Innovative Medicine and MedTech, with a diverse range of products and services that cater to human health and well-being. Johnson & Johnson's operations span across virtually all countries of the world, with a strong presence in the pharmaceutical and medical devices markets. The Innovative Medicine segment of Johnson & Johnson focuses on developing and marketing pharmaceutical...

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Price action

Investment thesis

Bull case

  • Strong operating cash flow of 24.20B provides robust 0.53x coverage of total debt 45.80B, indicating excellent debt servicing capability and financial flexibility.
  • Healthy cash reserves of 18.23B provide 2.85x coverage of short-term debt 6.39B, demonstrating strong liquidity position and minimal refinancing risk.
  • Operating cash flow of 24.20B provides strong 18.87x coverage of stock compensation 1.28B, indicating sustainable incentive practices.
  • Operating cash flow of 24.20B provides exceptional 27.07x coverage of interest expenses 894M, showing strong debt service capability.
  • Robust free cash flow of 19.60B exceeds capital expenditure of 4.61B by 4.25x, indicating strong organic growth funding capability.

Bear case

  • Operating cash flow of 24.20B barely covers its investment activities of (20.42B), with a coverage ratio of -1.19, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 24.20B provides thin coverage of dividend payments of (12.23B) with a -1.98 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Investment activities of (20.42B) provide weak support for R&D spending of 15.71B, which is -1.30x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Cash reserves of 18.23B provide limited coverage of acquisition spending of (14.92B), which is -1.22x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Retained earnings of 167.28B provide limited buffer against comprehensive income items of (15.24B), which is -10.98x, indicating elevated exposure to market risks.

Consolidation Items Breakdown of Revenue (2024)

Peer comparison

Companies in the Drug Manufacturers - General
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 LLY ELI LILLY & Co 940.24 Bn 84.66 19.19 42.51 Bn
2 JNJ Johnson & Johnson 656.09 Bn 49.20 10.65 45.80 Bn
3 AMGN Amgen Inc 389.67 Bn 89.91 26.60 54.59 Bn
4 ABBV AbbVie Inc. 363.54 Bn 129.05 16.59 68.74 Bn
5 MRK Merck & Co., Inc. 320.49 Bn 202.84 7.87 41.37 Bn
6 NVS Novartis Ag 304.60 Bn 21.78 5.37 35.46 Bn
7 AZN Astrazeneca Plc 291.12 Bn 30.97 5.01 32.63 Bn
8 NVO Novo Nordisk A S 219.30 Bn 13.62 4.51 20.59 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 3.39 2.39
EV to Cash from Ops. EV/CFO 39.90 27.43
EV to Debt EV to Debt 14.28 6.41
EV to EBIT EV/EBIT 37.57 29.56
EV to EBITDA EV/EBITDA 33.59 21.95
EV to Free Cash Flow [EV/FCF] EV/FCF 46.69 39.77
EV to Market Cap EV to Market Cap 1.00 1.28
EV to Revenue EV/Rev 10.62 7.09
Price to Book Value [P/B] P/B 11.60 12.10
Price to Earnings [P/E] P/E 49.20 73.51
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 2.05 0.92
Dividend Payout Ratio % Div Payout % (Qtr) 48.70 65.92
Dividend per Basic Share Div per Share (Qtr) 5.08 2.81
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 62.40 37.42
Interest Coverage Int. cover (Qtr) 36.24 20.26
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -4.68 -9.54
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -8.75 96.72
Dividend Growth (1y) % Div 1y % (Qtr) 4.53 2.18
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 68.53 74.22
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 7.42 29.18
EBIT Growth (1y) % EBIT 1y % (Qtr) 76.91 66.23
EBT Growth (1y) % EBT 1y % (Qtr) 79.57 310.53
EPS Growth (1y) % EPS 1y % (Qtr) 72.97 352.41
FCF Growth (1y) % FCF 1y % (Qtr) -5.53 47.43
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 3.60 8.06
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.48 0.38
Cash Payout Ratio Cash Payout (Qtr) 0.42 0.27
Cash Ratio Cash Ratio (Qtr) 0.36 2.11
Current Ratio Curr Ratio (Qtr) 1.07 6.17
Debt to Equity Ratio Debt/Equity (Qtr) 0.58 -0.40
Interest Cover Ratio Int Coverage (Qtr) 36.24 20.26
Times Interest Earned Times Interest Earned (Qtr) 36.24 20.26
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 43.20 -13.61
EBIT Margin % EBIT Margin % (Qtr) 35.16 -10.56
EBT Margin % EBT Margin % (Qtr) 34.19 -25.71
Gross Margin % Gross Margin % (Qtr) 68.10 64.91
Net Profit Margin % Net Margin % (Qtr) 27.30 -34.99