Johnson & Johnson stock at the peak: should we invest in the American healthcare giant? Photo credit: Adobe Srock.
The American group Johnson & Johnson, with a current market capitalization of $458 billion, is one of the ten largest companies in the world.
Johnson & Johnson is the world leader in pharmaceutical, medical and surgical instruments, not to mention hygiene and beauty products for mass distribution.
Check out our analysis of Johnson & Johnson: its profile, current share price, its success, and also its products.
Finally, we will ask ourselves if it might be interesting to invest in the Johnson & Johnson stock market.
Infographic: Johnson & Johnson Key Figures
Infographic: Johnson & Johnson Key Figures
$460 billion: market cap as of July 18, 2022
$20.9 billion: Johnson & Johnson Group earnings in 2021
Top 10 biggest global bands
2.4%: current dividend yield
1886: The year the Johnson & Johnson group was founded
Johnson & Johnson: No. 1 in the world in healthcare
Beginnings of Johnson & Johnson
The history of Johnson & Johnson begins 130 years ago with surgical antiseptics, the result of the work of Joseph Lister. So, in 1885, Robert Wood Johnson and his two brothers had the idea to develop sterile surgical dressings. This was the start of Johnson & Johnson’s success, which continued with the launch of a range of baby powders developed as early as 1893.
Since the beginning of the 20th century, Johnson & Johnson has been able to come to the aid of the population during significant historical events: during the First World War, Johnson & Johnson supplied soldiers with first aid, and in 1918, during the great Spanish flu pandemic, Johnson & Johnson produces a large number of protective masks.
These two events are just a few examples of Johnson & Johnson’s success over the past 130 years.
Johnson and Johnson Today
With sales of $93.8 billion in 2021 and a profit of $20.88 billion, the Johnson & Johnson empire has a presence in most of the world.
Its turnover in 2021 is distributed as follows:
• US$47.2 billion (50.31%);
• USD 23.6 billion in Europe (25.16%);
• $17.3 billion in the Asia-Pacific region (18.44%);
• US$5.7 billion in the rest of the world (6.07%).
3 segments of the Johnson & Johnson group
Pharmaceuticals: $52.08 billion in sales in 2021 (55%)
With its subsidiary Janssen, the Johnson & Johnson group develops and markets medicines and vaccines related to major pathologies: immunology, vaccines (including those related to Covid-19), infectious diseases, neurology; oncology; hematology; pulmonary hypertension; cardiovascular and metabolic diseases.
Consumer Health: 2021 revenue was $14.64 billion (16%).
In this segment, Johnson & Johnson invents and distributes consumer health and beauty products such as feminine hygiene products, first aid products (dressings, disinfectants, etc.), oral hygiene and beauty products.
Medical supplies: $27.06 billion in sales in 2021 (29%).
Johnson & Johnson Medtech develops and markets surgical products for hospitals. Instruments related to general and orthopedic surgery deserve special attention. The group also specializes in devices for the treatment of cardiac arrhythmias, strokes and neurovascular pathologies.
Johnson & Johnson Medtech also develops eye health applications.
Johnson & Johnson financial results
Johnson & Johnson revenue chart for 10 years (billion dollars)
Over the past 10 years, Johnson & Johnson’s turnover has fluctuated between $67.2 billion and $93.8 billion. In general, in the period from 2012 to 2021, it tends to grow, increasing from $67.2 billion in 2012 to $93.8 billion in 2021, i.e. +40% growth over 10 years.
Johnson & Johnson profit chart for 10 years (billion dollars)
Over the past 10 years, Johnson & Johnson’s net income has grown from $10.9 billion in 2012 to $20.9 billion in 2021, representing +92% growth over 10 years.
In 2017 alone, profits fell to $1.3 billion, which is explained by a high income tax allowance of $16.37 billion, but does not call into question the performance of the efficiency group.
Johnson & Johnson results for the first half of 2022
Results for Q2 2022 and H1 2022 were released on July 19, 2022. They show a +4% increase in revenue, but a decrease in net income:
• US$45.63 billion vs. US$47.45 billion in revenue between the first half of 2021 and the first half of 2022 (+4.0%);
• $12.75 billion vs. $9.96 billion in net income between the first half of 2021 and the first half of 2022 (-20.1%).
This decrease in net income for the first half of 2022 is not attributable to a decrease in operating efficiency of the Johnson & Johnson group, but is mainly attributable to the income statement item “Other (income) expenses” and expenses), which generated an exceptional profit for the first half of 2021 .
Note also the $593 million increase in research and development between the first half of 2021 and the first half of 2022.
Dividend Johnson & Johnson
Johnson & Johnson 10 Year Dividend Chart ($ per share, expiration date retained)
Johnson & Johnson is one of the 65 American Dividend Aristocrats.
Johnson & Johnson’s dividend increases from $2.40 per share in 2012 to $4.19 in 2021, representing +74.6% growth.
Johnson & Johnson stock is currently returning 2.40% with a stock price of $174.23 as of July 18, 2022.
Johnson & Johnson Stocks: Financial Performance Analysis and Stock Market Valuation
Johnson & Johnson: Our study of financial ratios
Johnson & Johnson presents the following ratios at a current share price of $174.23 as of July 18, 2022:
• 2021 EPS (earnings per share) set at $7.93, giving a 2021 EPS of 4.6%;
• equity capital of US$74.02 billion, well below its current market capitalization of US$458 billion;
• reasonable ratio of financial debt to equity of 0.46.
Graphical analysis of the Johnson & Johnson stock price in the stock market in the long term
Johnson & Johnson stock price chart over 20 years
Between the beginning of 2000 and the end of 2012, the share price of Johnson & Johnson rose from $48.5 to $71.6 (+48%), and then accelerated its growth and stopped at $174.2 in mid-July 2022.
Apart from a few bounces in 2009, 2015, 2018, and 2020, Johnson & Johnson’s stock megatrend is clearly bullish. What’s more, Johnson & Johnson stock is currently close to its all-time high hit on April 25, 2022 at $186.
Should you invest in the Johnson & Johnson stock market?
The Johnson & Johnson Group has an impressive rate of return on sales for a mature consumer group of its size:
• 22.3% in 2021;
• 17.8% in 2020;
• 18.4% in 2019;
• 18.8% in 2018.
Thus, its ability to generate profits is undeniable and can even be described as rare in large mature groups associated with “consumer consumption” (except for the technology, growth and GAFAM segments).
Things get more complicated when you look at the $460 billion market cap of the Johnson & Johnson group. Johnson & Johnson’s PER is currently 27.9 (average over the last 4 years). In other words, an investor currently interested in Johnson & Johnson shares is paying on the exchange for their shares for almost 30 years of the value of their annual earnings. This ratio seems too high, even with Johnson & Johnson’s EPS (earnings per share) growth of +10% per year (average over 10 years, excluding capitalization).
For comparison and to give examples of large French groups known to the general public, a few months ago big names among the world leaders in their sectors such as AXA and TotalEnergies could still be acquired with PER levels of less than 10. .
The same observation regarding the Johnson & Johnson dividend yield: less than 2.5%, which seems to us a bit low for an investment approach based on the dividend yield.
Although the Johnson & Johnson group has excellent margins, Johnson & Johnson stock seems to be too expensive for us at the moment.
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