Corporate Analysis: Johnson & Johnson
Florida Institute of Technology
Company: Johnson & Johnson (JNJ)
Johnson & Johnson (J&J), incorporated in 1887, is one of the largest companies in the pharmaceuticals manufacture industry. The company is engaged in the research and development, manufacture and sale of a range of products in the healthcare field. The company has a well-diversified landscape operating in three major segments: consumer products, pharmaceutical and medical devices and diagnostics. The company's corporate headquarters is located in New Jersey but has facilities in 57 countries. With over half its sales generated in the international market, it positions itself fairly well to weather U.S. dollar inflation. Currently valued at $63.7 billion, it employs 118,700 employees and operates with a decentralized management team with the intent to service its local customers with the highest quality and innovative approach. J&J prides itself on accomplishing 76 consecutive years of sales increases; 25 consecutive years of adjusted earnings increases; and 47 consecutive years of dividend increases. The company has a beta of about 0.6 which makes it less volatile than the market raising its appeal in current turbulent times. A ten year historical growth analysis projects the company's growth at 13.6% in the next ten years. The company has made major acquisitions which positions itself to be more profitable in future markets.
Upon analyzing the financials of J&J for the past two years, the company had an increase in all areas. The debt ratio is low (34.1%), which is good for creditors, and the quick ratio is about the same as the industry average (almost 1.5). J&J is in a very good financial position. The DuPont analysis concludes that at 30.5%, J&J uses its assets effectively to be a profitable company, coming in at an average higher than the industry.
After interpreting the WACC components, the WACC = (.05)(.218) + (.0837)(.782) = 7.6%. J&J has maximized shareholder wealth, and the current WACC is appropriate for future use because the stock prices have been increasing over the years.
The company is pricing shares at fair value, and not showing any sign of overvalue. The P/E is currently set at 13.20. The analyst opinion report on Yahoo! Finance concludes the mean recommendation for buying or selling to be at 2.2. This rating suggests that it is okay to buy J&J stocks (not a strong buy). Although profits slightly plunged third quarter from last year, J&J is still one of the world’s biggest and broadly-based health care companies, despite the increase in generic competition, J&J has shown that it has a very well diversified portfolio.
Johnson & Johnson was organized in New Jersey in 1886 and its worldwide headquarters remains in New Brunswick, New Jersey. It was founded with the revolutionary idea that doctors and nurses should use sterile sutures, dressings and bandages to treat people. In 1943, General Robert Wood Johnson, a former chairman and a member of the company’s founding family created “Our Credo” which spells out the values that guide the company’s decision making. Valuing Our Credo as a moral base, the company recruits people with value-based motivation and talent for innovation. The company has prospered from continued growth and enduring strength. Johnson & Johnson began listing its shares on the New York Stock Exchange for public investors in 1944. J&J is engaged in the manufacture and sale of a wide range of products related to health and wellness. It employs approximately 117,000 people in 250 companies in 57 countries. The company has several business segments: Consumer Healthcare Products, Medical Device & Diagnostics and Pharmaceuticals. Johnson & Johnson is the leader in its industry competing in a $1.2 trillion...
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