Assessing Johnson & Johnson’s Valuation After Major U.S. Manufacturing Expansion and R&D Investment Plans

If you’re tracking Johnson & Johnson (JNJ), the company’s recent announcement of a multibillion dollar commitment to expand its U.S. manufacturing is likely grabbing your attention. This week, Johnson & Johnson revealed plans for a new biopharmaceutical facility in partnership with FUJIFILM in North Carolina and previewed even more advanced manufacturing and R&D investments on the horizon. With a $2 billion commitment to the Holly Springs site and ambitions for further upgrades, the company is increasing its focus on U.S. capacity. This approach could reshape its competitive position in a fast-evolving sector. This scale of investment arrives on the back of an eventful year for JNJ, and markets seem to be taking notice. The stock has gained 10% over the past year, with steady upward momentum especially in the past month and quarter. While prior announcements this year included sizable investments in technology and research infrastructure, this latest manufacturing push could signal a long-term vision aimed at supporting innovation and job creation. Momentum appears to be building as Johnson & Johnson’s expansion efforts attract new interest and recalibrate expectations. The question now is whether this wave of U.S. investment is opening a buying window or if the market has already priced in all the growth these moves could unlock. How should investors think about valuation from here?

Most Popular Narrative: 2.1% Overvalued

According to the narrative by Goran_Damchevski, Johnson & Johnson is currently considered slightly overvalued based on projected earnings and growth. The narrative projects robust future performance, but notes that the market price may be running ahead of fair value.

I expect the company to grow revenues by 7.5% annually in the next five years, starting from their new $84B baseline following the separation, to $120.6B in 2028. The new business mix has higher margin characteristics, which is why I believe JNJ will be able to maintain a 20% profit margin in the future, resulting in $24B in earnings in 2028.

Curious what drives the lofty fair value calculation? The narrative’s bold assumptions about growth and profit margins may be surprising. What does the shift in business mix really mean for future earnings? Find out which scenario could push revenues to levels not seen before.

Result: Fair Value of $173.55 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, risks such as unresolved litigation and looming patent expirations could quickly shift the outlook and challenge these optimistic projections.

Find out about the key risks to this Johnson & Johnson narrative.

Another View: Discounted Cash Flow Paints a Different Picture

Looking through the lens of our DCF model, the outlook shifts completely. This method suggests the market may be missing hidden value and challenges assumptions made by the earlier earnings-based view. Which approach will prove truer in the end?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Johnson & Johnson for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Johnson & Johnson Narrative

If you want to put these perspectives to the test or dig into the numbers yourself, you can easily craft your own narrative in just a few minutes. Do it your way

A great starting point for your Johnson & Johnson research is our analysis highlighting 4 key rewards and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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