Johnson & Johnson (JNJ): Examining the Latest Valuation After a Quiet but Notable Share Price Climb

If you have been watching Johnson & Johnson (JNJ) shares recently, the steady upswing in its price may have caught your attention. While there has not been a specific news event driving the stock this week, the movement could be making investors pause and wonder if a turning point is underway. When a household name like Johnson & Johnson starts building momentum, it is natural to ask if the market is catching onto something or if this is just a routine stretch higher.

Zooming out, Johnson & Johnson has put together a decent run over the past year, with the stock climbing 14%. In the past month alone, shares tacked on over 6%, which stands out in a sector known more for steady compounding than abrupt gains. There have not been any landmark product launches or headline acquisitions lately. However, the broader healthcare sector has seen renewed investor interest as portfolios seek out durable profitability. That gradual shift is quietly showing up in JNJ’s numbers and has likely helped push the stock up in recent weeks.

With JNJ’s strong brand and reliable earnings, is the recent move a signal that the stock is trading at a bargain, or are investors simply factoring in more growth than the fundamentals suggest?

Most Popular Narrative: 3.1% Overvalued

According to the narrative by Goran_Damchevski, Johnson & Johnson is considered overvalued by 3.1% based on future growth prospects and business focus after the Kenvue spin-off.

The key threat to a pharmaceutical stock is the patent expiration of its high value assets. If a company lacks a product pipeline to strengthen its future product portfolio, losing exclusivity to any one drug can negatively impact the business. In the table below, you can see the top selling drugs for JNJ up to 2022. The company maintains a well-diversified drug pipeline with 45 products in stage 3 approval and 12 products in the final registration phase. While there is a risk that not all products in the pipeline will get approved, the number of treatments in development supports the potential for future revenues.

Is the market underpricing JNJ’s biotechnology ambitions? This narrative highlights a significant strategic shift and notable quantitative investments, all supported by a broad portfolio of late-stage drug assets. Interested in the key assumptions that underpin this fair value estimate? The underlying figures for this analysis may be surprising.

Result: Fair Value of $173.55 (OVERVALUED)

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

However, persistent legal challenges and looming patent expirations could quickly reshape the outlook for Johnson & Johnson’s profitability and growth trajectory.

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

Another View: Discounted Cash Flow Model Delivers Different Message

While some see Johnson & Johnson as modestly overvalued based on its current market multiples, our DCF model paints a much more optimistic picture and indicates the stock is undervalued. Which perspective will win out over time?

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 see the story differently, or want to delve deeper into the numbers, you can quickly put together 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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