Mead Johnson’s market valuation
Mead Johnson Nutrition (MJN) is a global leader in pediatric nutrition industry (XLP). As of January 12, 2016, Mead Johnson was trading at a higher multiple than Abbott Laboratories (ABT), the S&P 500 Consumer Staples Index (XLP), and the S&P 500 Index (SPY). On the other hand, the company was trading at a lower multiple than Nestlé SA (NSRGY) and Kraft Heinz Company (KHC) as of January 12.
As the above graph shows, as of January 12, 2016, Mead Johnson was trading at a forward PE (price-to-earnings) multiple of 19.9x, at the lower end of its one year range of 17.9x to 26.1x. By comparison, Nestlé, Abbott Laboratories, and Kraft Heinz were trading at a forward PE multiple of 20.4x, 17.6x, and 24.7x, respectively, as of January 21, 2016.
Below you can see the one-year reference range for Mead Johnson’s peers:
- Nestlé—18.7x to 23.6x
- Abbott Laboratories—17.1x to 22.8x
- Kraft Heinz—22.7x to 27.9x (Kraft Heinz was listed on the exchange on July 6, 2015)
By comparison, the Consumer Staples Index and the S&P Index were trading at multiples of 19.6x and 15.6x, respectively, as of January 12, 2016. Mead Johnson has a weight of 0.09% in the S&P 500 Index (SPY) and 0.93% in the Consumer Staples Select Sector SPDR ETF (XLP). Food and beverage companies make up 18.6% of the portfolio holdings of XLP.
Mead Johnson’s ETF exposure
MJN has a weight of 0.09% in the iShares Core S&P 500 ETF (IVV). IVV measures the performance of the large-cap sector of the US equities market that tracks the top 500 stocks. MJN has a weight of 0.09% in the iShares Russell 1000 Growth ETF (IWF), a growth-oriented ETF.
Now it’s time for a SWOT (strengths, weaknesses, opportunities, and threats) analysis of Mead Johnson. We’ll focus on strengths and opportunities in the next part.