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Investor Update: A Look at Johnson & Johnson's Key Developments

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Part 8
Investor Update: A Look at Johnson & Johnson's Key Developments PART 8 OF 8

What’s Johnson & Johnson’s Valuation?

Johnson & Johnson’s valuation 

Johnson & Johnson (JNJ) reported earnings per share (or EPS) of $1.83 on revenues of $18.8 billion in 2Q17. Wall Street analysts expect Johnson & Johnson to report EPS of $1.80 on revenues of $19.3 billion in 3Q17, an 8.2% increase in revenues as compared to 3Q16.

What&#8217;s Johnson &amp; Johnson’s Valuation?

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The above chart shows EPS and revenues for Johnson & Johnson over the last few quarters and estimates for 3Q17.

Forward PE

The price-to-earnings (or PE) multiple shows what one share can buy for an equity investor. As of September 26, 2017, Johnson & Johnson was trading at a forward PE multiple of ~17.2x as compared to the industry average of 16.9x. Other competitors such as Merck (MRK), Eli Lilly (LLY), and Pfizer (PFE) have forward PE multiples of 15.9x, 18.6x, and 13.3x, respectively.

Forward EV-to-EBITDA

On a capital-structure neutral basis, Johnson & Johnson trades at ~13.2x, which is on par with the industry average. Other competitors such as Merck (MRK), Eli Lilly (LLY), and Pfizer (PFE) have forward EV-to-EBITDA multiples of 11.9x, 13.7x, and 10.8x, respectively.

Analyst recommendations

Johnson & Johnson’s stock value has risen over 10.4% in the last 12 months. Wall Street analysts estimate that the stock price will rise ~4.9% over the next 12 months. Analysts’ recommendations show a 12-month target price of $137.60 per share compared to the price of $131.17 per share on September 25, 2017. Also, out of the 22 analysts tracking Johnson & Johnson, ten analysts recommend a “buy,” nine analysts recommend a “hold,” while three analysts recommend a “sell.” The consensus rating for Johnson & Johnson is 2.6, which is a moderate buy for value investors.

The iShares Edge MSCI Multifactor Healthcare ETF (HCRF) has 10.8% of its total assets in Johnson & Johnson (JNJ). HCRF also has 4.4% in Pfizer (PFE), 3.7% in Merck (MRK), and 3.3% in Humana (HUM).

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