J&J Stock Traded Below Fair Value According to Discounted Cash Flow Estimate

Johnson & Johnson (JNJ) stock has delivered a strong return over the past three years, but its current value is unclear. The company's Discounted Cash Flow (DCF) intrinsic value estimate suggests it could trade below fair value, while traditional market multiples indicate it may be undervalued. Over the past three years, JNJ returned 69.8% to shareholders.

The DCF model projects the cash that Johnson & Johnson could generate for shareholders and discounts it back to today. The company currently reports last twelve month free cash flow of about $21.7b. The model treats this as a base for growing but relatively mature cash generation rather than rapid expansion. On that basis, the 2 Stage Free Cash Flow to Equity model arrives at an estimated intrinsic value of about $364 per share.

Compared with the current share price, this implies the stock trades at roughly a 28.5% discount to the modelled intrinsic value. The clinical progress of seltorexant for major depressive disorder is one concrete example of why the cash flow outlook used in the model may differ from what the market currently prices in.