J&J Now Too Cheap To Its Peers To Ignore

4/20/17

Background

Far and away the world's largest healthcare company, and with many or most of its consumer brands also medicines or health-related, Johnson & Johnson (NYSE:JNJ) would normally, in my humble view, trade at a premium to the S&P 500 (NYSEARCA:SPY). More comparable would be other iconic, instantly recognizable names to both investors and the public such as Coca-Cola (NYSE:KO), Nike (NYSE:NKE), and P&G (NYSE:PG). PG, KO, Colgate-Palmolive (NYSE:CL), etc., all trade around a 25X P/E. Within pharmaceuticals, JNJ's largest profit driver, P/Es are all over the place, but comps such as Pfizer (NYSE:PFE), Merck (NYSE:MRK), and Lilly (NYSE:LLY) all trade around or above 30X TTM EPS using generally accepted accounting principles.

JNJ's second segment, devices, has fewer comps, but Medtronic (NYSE:MDT) trades around 28X EPS. Stryker (NYSE:SYK) is at 30X, etc.

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