Is It Too Late To Consider Johnson & Johnson After Its 40.6% 2025 Rally?

• Wondering if Johnson & Johnson is still attractively priced at today’s level, or if the big gains are already behind it? Let’s unpack what the numbers are really saying about JNJ’s valuation.
• After climbing to a recent close of $202.48, the stock is up 8.4% over the last month and 40.6% year to date, even after a small 2.4% pullback this past week. That kind of run naturally raises the question of whether the current price fully reflects its prospects.
• Recently, investors have been reacting to a mix of headlines around JNJ’s steady pipeline progress, product approvals, and continued focus on its core healthcare segments. At the same time, the market has been reassessing large cap defensive names like Johnson & Johnson as potential anchors in a more volatile macro backdrop.
• Despite those strong returns, our valuation framework gives Johnson & Johnson a solid 5/6 valuation score, indicating it still looks undervalued on most of the checks we run. Next we will walk through how different valuation approaches stack up for JNJ, and why there might be an even better way to think about its true worth by the end of this article.

Johnson & Johnson delivered 39.6% returns over the last year. See how this stacks up to the rest of the Pharmaceuticals industry.

Approach 1: Johnson & Johnson Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business is worth by projecting the cash it can generate in the future and then discounting those cash flows back to today’s dollars.

For Johnson & Johnson, the latest twelve month free cash flow sits around $19.5 billion. Analysts expect this to climb steadily as the company grows its core healthcare franchises. Using a 2 stage Free Cash Flow to Equity model, cash flows are projected out over the next decade, with analyst estimates in the near term and Simply Wall St extrapolations thereafter, reaching roughly $48.0 billion by 2035.

When all those future cash flows are discounted back and summed, the model arrives at an intrinsic value of about $384 per share. Compared with the recent share price near $202, the DCF suggests Johnson & Johnson is trading at roughly a 47.3% discount to its estimated fair value. This implies potential upside if these cash flow assumptions play out.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Johnson & Johnson is undervalued by 47.3%. Track this in your watchlist or portfolio, or discover 913 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Johnson & Johnson.

Approach 2: Johnson & Johnson Price vs Earnings

For a mature, consistently profitable business like Johnson & Johnson, the Price to Earnings ratio is a useful way to gauge how much investors are willing to pay for each dollar of current earnings. In general, stronger and more reliable earnings growth, combined with lower perceived risk, justify a higher PE multiple, while slower growth or higher uncertainty usually call for a lower, more conservative PE.

Johnson & Johnson currently trades on a PE of about 19.4x, which is roughly in line with the broader Pharmaceuticals industry average of around 19.7x and below the peer group average of roughly 23.7x. Simply Wall St also calculates a proprietary Fair Ratio of about 29.6x for Johnson & Johnson, which reflects what a more tailored PE multiple could be once factors like its earnings growth profile, profit margins, industry positioning, market cap, and company specific risks are taken into account.

Because this Fair Ratio is well above the current 19.4x multiple, the stock appears undervalued on a PE basis, even after its recent share price rally.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Johnson & Johnson Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to combine your view of Johnson & Johnson’s story with your own assumptions for future revenue, earnings, margins, and fair value. A Narrative is your personal storyline for the company, where you connect what you believe about its pipeline, legal risks, and business reorganization to a clear financial forecast and then to a single fair value number that you can easily compare to today’s share price to help decide whether to buy, hold, or sell. On Simply Wall St, millions of investors do this inside the Community page, where Narratives are easy to create, browse, and update as new information such as earnings, product approvals, or litigation news comes in. That information automatically refreshes the underlying forecasts and fair values. For example, one Johnson & Johnson Narrative might include assumptions of stronger growth in Innovative Medicine and MedTech and result in a fair value near the upper analyst target around $200. A more cautious Narrative might emphasize patent expiries and legal risks and support a fair value closer to the lower target near $155.

Do you think there's more to the story for Johnson & Johnson? Head over to our Community to see what others are saying!

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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