A growing number of investors seem to believe that Johnson & Johnson (JNJ) is overvalued after seeing some relatively weak financial results. The combination of a low growth rate of the financial results and a relatively high valuation is a cause for concern for many. It is correct that this combination is usually quite a bad one for a stock’s future, but I believe that Johnson & Johnson’s shares are not in any sort of danger.
Growth Rates
Johnson & Johnson published its second quarter report on the 18th of July. A small revenue miss of $110 mln was reported, landing the revenue at $18.84 bln with a yoy growth rate at 1.9%. For many, apparently, this is an alarming growth rate for the company. But if we look at the company’s history, this is far from an oddity. Actually, the average annual growth rate of the past 9 years has been exactly 1.9%.
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