What Does the Recent J&J Stock Rally Mean for Its 2025 Valuation?

If you are eyeing Johnson & Johnson stock and mulling over whether now is the right time to buy, hold, or simply keep watching, you are not alone. The healthcare giant has always attracted the attention of long-term investors looking for stability and steady gains, but recently, the story has taken a few interesting turns. In the past week, Johnson & Johnson shares nudged up 2.0%, adding to a modest 1.7% gain over the last 30 days and capping off an impressive 24.8% rise year-to-date. Over the last five years, the stock has compounded by 41.7%, showing its staying power, even through market turbulence and shifting investor sentiment.

This recent momentum comes on the heels of fresh optimism across healthcare stocks, as broader market developments point toward renewed confidence in companies with resilient revenue streams and powerful product pipelines. The risk perception for defensive stocks like Johnson & Johnson appears to be softening, leading many investors back to familiar names.

But here is where it gets especially interesting: by our core valuation checks, Johnson & Johnson comes in with a numerical score of 4, meaning the company is currently undervalued on four out of six major metrics. This raises a compelling question: is the stock’s recent run just the beginning, or are we heading for a pause?

In this next section, we will dive into the valuation approaches that underpin this score, unpack which levers matter most, and hint at an even smarter lens for understanding the company’s value by the time we wrap up.

Johnson & Johnson delivered 14.9% 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

The Discounted Cash Flow (DCF) model estimates a company’s value by projecting its future cash flows and discounting them back to today’s dollars. For Johnson & Johnson, this approach begins with its latest trailing twelve-month free cash flow (FCF), which stands at $18.4 Billion. Analyst estimates forecast steady increases; by 2029, the company’s FCF is projected to rise to $35.5 Billion, while even longer-term figures extend to over $55 Billion by 2035 based on reasonable extrapolations.

This growth reflects Johnson & Johnson’s robust operations and the resilience of its core business. The DCF analysis used a two-stage model, blending analyst consensus for the next five years with extended estimates by Simply Wall St for the years beyond. All cash flows are calculated in USD.

Based on these projections, the DCF model arrives at an intrinsic value of $442.56 per share. Compared to the current market price, this implies that Johnson & Johnson is trading at a 59.4% discount to its estimated fair value. This suggests that the stock may be undervalued according to this methodology.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Johnson & Johnson is undervalued by 59.4%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Johnson & Johnson Price vs Earnings

The Price-to-Earnings (PE) ratio is a well-established way to assess the valuation of profitable companies like Johnson & Johnson, as it measures how much investors are willing to pay today for each dollar of earnings. Since Johnson & Johnson generates reliable profits year after year, the PE ratio serves as a relevant metric for comparing valuation both within its industry and against broader benchmarks.

Market participants often accept higher PE ratios for companies expected to deliver strong, stable earnings growth, or those seen as less risky than peers. Conversely, a lower PE is usually assigned to companies facing uncertainty or little expected earnings improvement. With that in mind, Johnson & Johnson currently trades at a PE ratio of 19.1x. For reference, the average PE ratio among its pharmaceutical industry peers is 18.3x, while the broader group of similar-sized peers averages a higher 22.4x.

Simply Wall St's “Fair Ratio” model takes this one step further by blending not just earnings growth outlook and risk, but also profitability, industry specifics, and company size to arrive at a fair PE ratio for Johnson & Johnson. This comes to 26.7x. This Fair Ratio is designed to provide a more holistic yardstick than a straightforward peer or industry comparison, as it tunes the valuation to reflect the company’s unique blend of qualities and challenges.

Comparing Johnson & Johnson’s actual PE of 19.1x to its Fair Ratio of 26.7x, the stock appears undervalued on this metric, supporting the case that it may have more room to run if the fundamentals hold up.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Johnson & Johnson Narrative

Earlier, we hinted at a smarter way to think about valuation, so let's introduce you to Narratives. In simple terms, a Narrative is your story about a company, the thinking and assumptions you have about its prospects, transforming your perspective on Johnson & Johnson from just numbers to a living, evolving forecast.

Narratives let you connect Johnson & Johnson’s business story to concrete financial assumptions, such as fair value, projected revenue, and expected margins, grounding your view in both the qualitative and the quantitative. On Simply Wall St's Community page, a resource used by millions, these Narratives are an accessible, easy-to-use tool that helps you clarify and track your own reasoning, while also learning from the stories of other investors.

Here’s how Narratives work: you build and customize your financial view of Johnson & Johnson, then instantly see how your Fair Value calculation compares to its current market price, making it clear whether you think it’s a buy, a sell, or a hold based on your beliefs. As soon as new information arrives (like earnings updates or breaking news), Narratives update automatically, letting your view stay current without extra effort.

For example, some investors may take a very optimistic Narrative, seeing J&J’s “rich drug pipeline” and 7.5% expected revenue growth, while others focus on risks and forecast lower growth and margins; Narratives capture both, letting you compare and decide what resonates with you.

Do you think there's more to the story for Johnson & Johnson? Create your own Narrative to let the Community know!

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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