JNJJNJ
US • HEALTHCARE
$263.40
P/E
30.54
PEG
4.23
FCF Yield
2.9%
Rev Growth YoY
+6.6% YoY
Gross Margin
68.1%
Health Score
8/10
D/E Ratio
0.59
Confidence
MEDIUM
Business Snapshot
Johnson & Johnson operates as a diversified healthcare conglomerate, generating revenue primarily from its pharmaceutical segment (focused on immunology, oncology, and neuroscience), its MedTech division (surgical instruments, orthopedics, and cardiovascular devices), and its former consumer health business (recently separated as Kenvue). The company holds a dominant competitive position as one of the world's largest and most diversified healthcare companies, benefiting from scale, a vast patent portfolio, and entrenched relationships with hospitals and providers. With a market capitalisation of $624.12B, JNJ is a mega-cap company with TTM revenue of $97.93B, placing it among the largest firms in the global pharmaceutical industry. A key defining characteristic is its defensive, recession-resistant business model, underpinned by a broad mix of prescription drugs with long patent lives and recurring revenue from medical devices and consumables.
Financial Health
JNJ demonstrates strong financial health with solid profitability, reporting a gross margin of 68.1% and a net margin of 21.5%, indicating efficient operations and pricing power. The balance sheet is healthy but not fortress-like, with a debt-to-equity ratio of 0.59x, well below distress levels, and a current ratio of 1.03x, suggesting the company has barely enough current assets to cover short-term liabilities, which is a modest liquidity constraint...
Risk Assessment
- VALUATION — P/E of 30.54x trades at a significant premium to the sector average of 22x, pricing in a high margin of safety that may not materialise.
- EARNINGS QUALITY — Earnings growth of -1.0% YoY signals a contraction in net income, despite revenue growth of 6.6%; this divergence warrants scrutiny of cost or margin pressure.
- VALUATION DIVERGENCE — The DCF estimate of $201.89 implies the current price of $263.40 is a ~23% premium, creating a gap between market price and fundamental model output.
- DEBT / LIQUIDITY — Current ratio of 1.03x is very close to the 1.0x threshold, indicating minimal liquidity buffer to cover short-term obligations in a stress scenario....
JNJ demonstrates strong financial health with solid profitability, reporting a gross margin of 68.1% and a net margin of 21.5%, indicating efficient operations and pricing power. The balance sheet is healthy but not fortress-like, with a debt-to-equity ratio of 0.59x, well below distress levels, and a current ratio of 1.03x, suggesting the company has barely enough current assets to cover short-term liabilities, which is a modest liquidity constraint. Free cash flow generation is robust at $17.80B, providing a solid FCF yield of 2.9%, ample capacity for dividends, share buybacks, and R&D reinvestment. Overall, the company's cash-rich profile and manageable debt load support a strong investment-grade credit profile, though the minimal current ratio warrants monitoring for any tightening in working capital.
- VALUATION — P/E of 30.54x trades at a significant premium to the sector average of 22x, pricing in a high margin of safety that may not materialise. - EARNINGS QUALITY — Earnings growth of -1.0% YoY signals a contraction in net income, despite revenue growth of 6.6%; this divergence warrants scrutiny of cost or margin pressure. - VALUATION DIVERGENCE — The DCF estimate of $201.89 implies the current price of $263.40 is a ~23% premium, creating a gap between market price and fundamental model output. - DEBT / LIQUIDITY — Current ratio of 1.03x is very close to the 1.0x threshold, indicating minimal liquidity buffer to cover short-term obligations in a stress scenario.
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