Johnson & Johnson is an American multinational corporation founded in 1886 that develops medical devices, pharmaceuticals, and consumer packaged goods. Johnson & Johnson researches and develops, manufactures, and sells a range of products in the health care field worldwide. It operates through three segments: Consumer Health, Pharmaceutical, and Medical Devices. This week, I fundamentally analyze Johnson & Johnson’s stock. I review JNJ’s operating segments, look at its key ratios, derive the intrinsic value using Discounted Cash Flow (DCF) analysis, and calculate the expected rate of return from this investment. Since this is a long video, please feel free to use the time stamps in the video if you only wish to watch certain topics.
I review various key ratios such as Revenue, Net Income, Shares outstanding, Dividends, Payout Ratio, Free Cash Flows (FCF), Financial Leverage, Current Ratio, Debt to Equity Ratio, Return on Equity (ROE), Days Sales Outstanding (DSO), Days Inventory, Payable Period, Cash Conversion Cycle, Inventory Turnover, etc.
After taking into account 2020’s free cash flow of $20,189 million figure, a 5% growth rate of FCF (growth for the next 10 years), 10% discount rate, 4% long term growth rate (growth from 10 year mark to perpetuity), 2,671 million shares outstanding, and $32,635 million of long term debt, the DCF analysis yields us an intrinsic value of $125 per share. If we drop the discount rate from 10% to 8.6%, the intrinsic value comes to $168.81 per share. Using the current stock price of about $169 per share, and taking into the shares outstanding and future projects of free cash flows, we get the annual expected rate of return to be 4.9% if we hold this security through 2060.
0:42 Operating Segments
5:59 Key Ratios Analysis
17:11 Discounted Cash Flow Analysis / Intrinsic Value
19:26 Expected Rate of Return Calculation
20:29 Summary / Conclusion
JNJ’s Website: here
Morningstar Key Ratios Link: here.
Useful Resources here.
Johnson & Johnson is an American multinational corporation founded in 1886 that develops medical devices, pharmaceuticals, and consumer packaged goods. Johnson & Johnson is engaged in the research & development, manufacture, and sale of a broad range of products in the healthcare field.
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