JNJ Stock: Cash Flows Suggest Undervaluation, Earnings Multiples Point to Higher Price

Johnson & Johnson (JNJ) stock has delivered a 69.3% total return over the past five years, but current valuation checks send a mixed message.

The Discounted Cash Flow (DCF) intrinsic value estimate points to upside, with an estimated value of $364 per share, roughly 28.8% above the current share price.

However, earnings-based multiples look less generous, with Johnson & Johnson trading on a P/E ratio of about 29.7x, well above the Pharmaceuticals industry average of 17.1x and the peer group average of 47.2x.

The ongoing talc litigation and proposed US$5.5b settlement are still in view, but do not seem to have had a significant impact on the stock price, which remains below the level implied by this cash flow profile.