Shares of JNJ are in the long term growing trend, however last few months were quite weak for JNJ shareholders. Shares went down from around $123 to around $115 – still not huge drawdown, but is it the end of correction?
Company is probably well known to DGI investors, so let’s look directly on financial results:
US market is growing well, International is weak -> due to currency issues. Surely, in short term it means less USD in the pocket, but in the long term if we assume that Euro will rebound then we will see some extraordinary growth (when currency will be supporting).
Even though Q3 EPS was up by 12.8% to 1.68 USD guidance for 2016 wasn’t changed.
Current valuation (2017 consensus):
EV/EBITDA = 10.8
P/E = 17.3
Dividend yield = 2.8%
Well, valuation is not low, but with growth of results and some decline in share price is now neutral for me. It is not special offer, but I can imagine that company will be traded at 12 times ETBIDA, so optimists can find some upside.
How about long term growth? Well, I can’t really comment on biotech products – they are too complicated for me. What I can say is that there are many to enter the market in the future, there are also products with declining sales. Overall company is high quality (Dividend King), so I expect (maybe naively), that results will further increase.
Summing up, company is still growing and delivering guidance. Valuation is neutral for me, when share price drops to around $95 – $100 I think I will buy some shares. Otherwise I will be patiently looking for other opportunities…
Disclaimer JNJ no position