Johnson & Johnson (NYSE: JNJ) Is A Great Value Stock in the Current Market

January 18, 2018, 12:43 pm ET, BY Simon M.- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

Johnson & Johnson (NYSE: JNJ) had a stellar 2017 where revenue growth was driven by strategic acquisitions as well as organic growth. JNJ is the world’s largest healthcare company given that it is composed of hundreds of smaller companies, which makes it quite challenging to consistently generate growth in its three operating segments.

Article Summary

JNJ is a great value stock in a very expensive market.

The company has increased its dividend payout for the last 55 years.

The bullishness that many analysts and investors have towards JNJ is well deserved.

Here’s the trading report on JNJ.

JNJ stock rallied by about 9% from mid-October to January this year with much of the rally driven by its excellent third quarter earnings report, which triggered the bullish sentiment towards the stock. What makes JNJ a great value stock is the fact that it has increased its dividend for the last 55 years, which makes it a dividend King, while its stock price increased by about 22% last year.

The bullishness that many analysts and investors have towards JNJ is well deserved given that the company is not satisfied to ride on its previous successes as its CEO Alex Gorsky recently stated that he wants the company to operate in crisis mode. Alex wants the company to stay ahead of its competitors by being innovative and making strategic partnerships that will help the company to capitalize on future trends in the healthcare industry.

There are other healthcare companies such as Stryker Corporation (NYSE: SYK) and Becton Dickinson and Co (NYSE: BDX), which are both high quality healthcare companies. However, the two companies are quite overvalued in comparison to JNJ, which has a P/E ratio of 25.54, while Stryker’s P/E ratio is 34.20 and BDX’s P/E ratio comes in at 49.73.  

JNJ continues to develop new drugs such as Tremfya, which won FDA approval in 2017, and is used to treat moderate to severe Plaque Psoriasis in adults. The drug is currently a market leader as it performed way better than Humira, which is considered as the industry benchmark, and is manufactured by AbbVie Inc (NYSE: ABBV). Tremfya could be a major source of revenue this year and into the foreseeable future.  

The company’s acquisition of Actelion significantly boosted its revenues in the pharmaceuticals segment as was the acquisition of Abbott Medical Optics, which also boosted the company’s medical devices revenues. The company is also set to benefit significantly from the recently passed tax reform bill, which could allow it to repatriate over $41 billion of cash it holds overseas.

Finally, it is not enough to know that a stock is likely to head higher, or lower this year. As an investor or trader, it is important to time your entry and exit points accurately in order to minimize risk and maximize your profit potential.

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