Is Johnson & Johnson (JNJ) overvalued?
On Equity Rank's model estimate, JNJ trades 13% above its fair value. Johnson & Johnson (JNJ) last closed at $276.22; the multi-method model fair value is $244.26.
| Price | Model fair value | Price vs model |
|---|---|---|
| $276.22 | $244.26 | 13% above |
What the answer rests on
- 2 of 9 valuation methods put JNJ's value above its price and 7 put it below, so the methods mostly agree.
- To justify today's price, JNJ's free cash flow would need to grow about 3.4% a year for ten years (a reverse discounted cash flow). Over the last three years it actually grew 4.7% a year.
- JNJ trades at 41.9 times its last year's earnings, against a median of 27.2 for 14 profitable Drug Manufacturer companies.
- Over the past year the price sat below the model fair value on 0% of trading days. The gap ranged from 6% above to 49% above the model fair value.
Read this before relying on it
The model fair value is an estimate from published financial statements. It is not a forecast of where the price goes, and it can be wrong. Within 10% either side we call it close to fair value: valuation models are not precise enough to read more into a smaller gap. Our own lists have no proven edge over the market yet; the live record shows every result, misses included.
Every valuation method behind JNJ's fair value · What prices assume · Other companies