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Johnson & Johnson’s Valuation in December 2017

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A look at Johnson & Johnson

Johnson & Johnson (JNJ) is one of the leading pharmaceuticals and medical devices companies, with products sold in more than 200 countries. Johnson & Johnson reported revenues of ~$19.7 billion during 3Q17, for 10.3% growth compared to revenues of ~$17.8 billion during 3Q16.

Johnson & Johnson reported earnings per share (or EPS) of $1.90 for 3Q17. The chart above compares the revenues and earnings per share for Johnson & Johnson since 1Q16.

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Forward PE multiple

A price-to-earnings (or PE) multiple represents what one share can buy for an equity investor. On December 27, 2017, Johnson & Johnson was trading at a forward PE multiple of ~17.8x, compared to the industry average of 15.8x.

Competitors Merck & Co. (MRK) and Pfizer (PFE) are trading at lower forward PE multiples of 13.8x and 13.1x, respectively. Bristol-Myers Squibb (BMY) is trading at a higher forward PE multiple of 18.8x.

Forward EV-to-EBITDA

On a capital structure–neutral basis, Johnson & Johnson trades at ~13.0x, compared to the industry’s average of ~13.2x. Merck & Co. (MRK) and Pfizer (PFE) are trading at lower forward EV-to-EBITDA[1. enterprise value to earnings before interest, tax, depreciation, and amortization] multiples of 10.6x and 10.7x, respectively. Bristol-Myers Squibb (BMY) is trading at a higher forward EV-to-EBITDA multiple of 15.9x.

The SPDR S&P Pharmaceuticals ETF (XPH) holds 4.3% of its total investments in Johnson & Johnson (JNJ), 4.4% in Pfizer (PFE), 4.4% in Merck & Co. (MRK), and 4.2% in Bristol-Myers Squibb (BMY).

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