JNJ Johnson & Johnson
A durable healthcare franchise, but six-percent economics cannot justify a price implying fifteen-percent growth.
The business
Johnson & Johnson develops and sells patented medicines and medical technologies worldwide. It earns high margins from pharmaceutical innovation, clinical evidence, physician trust, regulatory approvals, and a global commercial infrastructure. Individual drugs are difficult to predict, but the diversified portfolio and development engine are reasonably understandable.
Quality gate · 82/100
Moat & management
| Moat | wide moat |
| Source | intangible |
| Trajectory | stable |
| Management | adequate |
Patents, regulatory approvals, clinical data, physician relationships, and global distribution protect attractive returns. Patent expirations continually weaken individual franchises, however, so maintaining the moat requires sustained research productivity and disciplined acquisitions.
The balance sheet is sensible and share count has declined, but acquisition returns, litigation exposure, and the constant need to replace expiring drugs temper confidence in capital allocation.
Owner-earnings inputs
| Owner earnings (TTM) | 17.41B |
| Owner-earnings yield | 2.9% |
| Free-cash-flow yield | 2.9% |
| Growth used (normalized) | 6.0% |
| Market-implied growth (reverse DCF) | 15.3% |
| Terminal growth | 3.0% |
| Discount rate (hurdle) | 9.1% |
Projected owner earnings
| Yr | Owner earnings | Growth | PV |
|---|---|---|---|
| 1 | 18.46B | 6.0% | 16.92B |
| 2 | 19.53B | 5.8% | 16.41B |
| 3 | 20.61B | 5.6% | 15.89B |
| 4 | 21.72B | 5.4% | 15.35B |
| 5 | 22.83B | 5.1% | 14.79B |
| 6 | 23.96B | 4.9% | 14.23B |
| 7 | 25.09B | 4.7% | 13.66B |
| 8 | 26.22B | 4.5% | 13.09B |
| 9 | 27.34B | 4.3% | 12.52B |
| 10 | 28.46B | 4.1% | 11.94B |
| 11 | 29.55B | 3.9% | 11.37B |
| 12 | 30.63B | 3.6% | 10.81B |
| 13 | 31.68B | 3.4% | 10.25B |
| 14 | 32.70B | 3.2% | 9.70B |
| 15 | 33.68B | 3.0% | 9.16B |
Key risks
- Major patent expirations outpace pipeline replacement
- Talc and other product-liability claims cause lasting financial or reputational damage
- Drug-pricing regulation and unsuccessful research spending reduce returns
Catalysts
- Successful launches and label expansions offset mature pharmaceutical franchises
- MedTech innovation and operating improvements produce durable growth
Recent news
score · 8 articles
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⚠ maintenance capex ≈ min(capex, D&A), capped at FCF · Price pays for ~15%/yr owner-earnings growth over 15y (reverse DCF); model credits 6%. · Rich vs our conservative value, but a quality business is not a short — stance is WAIT for a better price, not sell.