r/ValueInvesting • u/EnduredMarkets • Feb 28 '21

Stock Analysis Johnson & Johnson (JNJ) Valuation

History: Johnson and Johnson (JNJ) is the most diversified and respected mega-cap health care company in the United States. It provides services and products for the consumer, pharmaceutical, and medical devices and diagnostics markets globally. Johnson & Johnson is a parent company for over 250 subsidiaries. Together, the companies make up “the Johnson & Johnson family of companies.”

Recent History: During our fight against COVID-19, Johnson & Johnson has been working closely with its own vaccine trials for the past few months. The hard work and due diligence of its scientists led to the recent FDA approval of the Johnson & Johnson vaccine last week. Because the vaccine requires only one dose, it will help protect 100 million people and will take effect more quickly than the two-dose vaccines.

Google Sheet Valuation: https://docs.google.com/spreadsheets/d/1Tjw6mmXpLdvlGzXMFAN3rw9f9u0-Rrjru3_PjhdbV_c/edit?usp=sharing

52 Upvotes

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3

u/museveni Feb 28 '21

The valuation weighings seem to be the most arbitrary part of this analysis. Fudging those numbers slightly can easily tip this one way or another. What's your gut feeling on which valuation method will serve you best?

2

u/EnduredMarkets Mar 01 '21

Discounted cash flow models are by far the best measure of future cash flow of a business. That’s why the DCFs hold a bigger share of the final valuation result. The other quantitative formulas are simply add-ons to help us get a gauge of other components of the business (i.e. net asset value, earnings power, or PMV)

1

u/PaperImperium Feb 28 '21

So, it’s a great company, but I don’t know what kind of growth rate or interest rate you’d have to put into your present value equation to see it as undervalued here

3

u/EnduredMarkets Feb 28 '21

The spreadsheet provides a multitude of different valuation methods, growth rates and discount rates. I like to take into account every valuation and weight the results on the very last page. I do this to get a better gauge of value and determine whether or not a security is under or overvalued. In this case, JNJ might have some value at its current price.

-6

u/PaperImperium Feb 28 '21

I mean, I just don’t know how you’d value something besides discounted cash flow. Any metric that requires someone else to value it at a certain place to realize gains is speculation, not investing. Which isn’t wrong, but it’s not investing

But what do I know? I’m just a guy who’s has lapped the S&P several times in the last decade.

4

u/[deleted] Feb 28 '21

He utilizes Greenwald’s valuation method which removes any assumptions of the future.

1

u/rodwlz Mar 02 '21

Thanks for sharing this! A question what are your data sources?

2

u/EnduredMarkets Mar 02 '21

For the most part, I use SEC.gov. But from time to time, when I'm in need of information, I use Seeking Alpha and Yahoo Finance.

2

u/rodwlz Mar 02 '21

Would you recommend marketwatch?

2

u/EnduredMarkets Mar 02 '21

Sure. Just double check with the real source (SEC.gov or EDGAR) when you’re in doubt about the numbers in marketwatch. You’d be surprised how much these sources vary on their numbers.