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  • Johnson & Johnson Stock Analysis| JNJ Stock Analysis


Justin (00:00): In this video, I will give you a detailed breakdown of the Johnson & Johnson stock. And I'm going to provide you with both my analysis and a 12-month price prediction on the Johnson & Johnson stock. If you're not familiar with Johnson & Johnson, they were founded in 1886, and they basically develop medical devices and pharmaceutical and consumer packaged goods. They trade under the stock ticker, JNJ. Before we continue, please do me a huge favour and hit the like button below this video now. This helps me rank these videos on YouTube, and every single like really does help me. So please, please click on that like button now. 

(00:39): Right, so let's take a very quick look at this stock. So, one of the first things I want to go and look at is the market cap, currently sitting at 430 billion. The next thing I'm looking at is the P. E. ratio. Ideally, I'm looking for a P. E. ratio under 20. We're sitting at 25 here, not ridiculously over the top, but it indicates a little bit of sentiment driving the price here. But as I said not ridiculous to the current market conditions. I mean, I see companies here with P. E. ratios in excess of 90, which is just absolutely crazy. The next thing I want to look at and see is if the stock value has at least doubled in the last 10 years. So, if we just go take a look at the price history here. Going back sort of 10 years or so, we can see that the price was, you know, in the low 50s high 40s, and we now sitting at 163. So definitely, in the last decade, the stock has definitely gained decent amounts of value. 

(01:35): Then we look at the dividend yield, which is currently sitting at 4.4%, which is not too bad. And then the next thing I want to have a look at is the net profit margin. I'm looking for companies with a net profit margin, recently of at least 10% or more, so 15% net profit that's looking good. I'm also taking a look at the quick revenue figures. I'm looking at total revenue. I’m looking at gross profit. I’m looking at operating income. And specifically, what I want to do is I want to look at the last three years, and I want to make sure there's been a general upward trend. So, we're looking for three consecutive growth years. As we see, if we go back here with 76, 81, 82, that looks good on total revenue. Gross profit 51, 58, 59 That’s also a check, and then operating income 19, 21 and 20 so, operating income, a little bit of a decline there, not the end of the world. And then, net income, we've got 1.3, 15.3, and 15.1 again, a little bit inconsistent, but not the end of the world. Not the kind of figures that will make or break my decision here, and in a second, we're going to go into my spreadsheet, and I'll break down the exact things that I'm looking at here. 

(02:44): The next thing I'm going to have a look at quickly is the balance sheet. What we want to do is we want to have a look at the asset to liability ratios. They don't have any data in this current system here on eToro, so I'm going to hit across quickly to Yahoo Finance. It’s absolutely free if you ever want to look up some details so, if I go to the balance sheet here for the current period of 2019, all in the right direction. So, so far, stocks looking pretty good. Now let's go and see if it measures up against the fundamental 12-step process that I use to decide whether stocks are worth buying into or not. So, P E ratio. It is currently under 25, so I'm going to give it a check there. Ideally, I would like it generally under 20. Still, under the current market conditions, I've raised the bar a little bit, considering there is a lot of sentiment behind companies at the moment. Profit margins are in excess of 10%. Assets are greater than liabilities. We've got total revenue, gross profit, operating income, and a general upward trend. There are one or two places dipped a little bit but not the end of the world. Net income is an example of that. Net income is a little bit inconsistent over the last 3 years, but it's not ridiculous. And then we're looking at cash from operating activities. So, again you can go to Yahoo Finance and get this content if you want or, you know, whatever charting platform you're using. So operating cash flow, if I go back and I have a look at the last three years, we can see a general upward trend. So, really not too much of a problem there. 

(04:18): And then what I want to have a look at is free cash flow growth. So, your free cash flow growth is calculated by taking your cash from net operating activities and then basically removing capital expenditures. So, if we're going to have a look here at the cash flow statements, we see operating cash flow, for example, in 2019 23416, and then if we go down to capital expenditure, we're looking at 3.498. So, you know, we've got some decent margin there. Also, the free cash flow, in comparison to the dividend yield, is also very important. We want to make sure that there's more free cash flow being brought in and held on to than a dividend being paid out. So, we take a market cap of 430 billion. We have a dividend yield of about 4.04%. That means that the dividend pay-out was 17.3 9 billion last year, and we want to make sure that our free cash flow is obviously greater than that. And so, in this example, we have a free cash flow of 18.3 billion for the last financial year. So, you know, with a billion to spare, there's definitely room in the share. And then, finally, we’re looking at the actual share price. As I mentioned, we have seen it more than double in the last decade, which is a really, really positive sign, so I’m taking in my 12-point system for basically evaluating shares. I give this a buy score of 69%, a sell score of 23%. 

(05:58): So it definitely checks many boxes in terms of a value stock worth buying a stock that is worth holding. Now, let's have a look at the price predictions. The industry is currently projecting $177 per share, presently sitting at 165. So not the most earth-shattering amount of growth, but I think something that every investor has to take into consideration when looking at the stock is the dividend yield. When we are buying shares, we tend to overlook the value of dividends, especially if you take your dividends and compounding them back in and buying shares. 

(06:34): So, from that perspective, I would definitely say this is a stock Johnson & Johnson's a stock that you should look into. I personally already own it. I have it in my portfolio, and it constitutes about three and a half percent of my portfolio. I've held the stock now for quite a fair amount of time between different trading platforms that I use. It is one of the long-term investments that I'm invested in, and I'm very happy with my investment. And I really hope that you found value in this analysis, which helps you in your decision-making. 

(07:06): Before you go, one last thing. On this channel, we discuss all money-related issues, including saving, investing and wealth creation, and I'd like to invite you to subscribe to this channel. In fact, I'm going to give you a flat-out bribe to get your subscription. Every month I'm going to be giving away a signed copy of my book “The Money Secret”, along with a branded channel cap to one of my active subscribers, and I'll ship this to anywhere in the world, absolutely free. All you need to do is hit the subscribe button now and click the bell to turn on all notifications for our channel, and then leave me a comment below this video. I'd really appreciate your subscription, and I look forward to joining our tribe. 

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David Bester
Justin Harrison