JNJ
JOHNSON & JOHNSONNYSEValuation snapshot
Above base casePrice is between the base and bull cases.
Price as of Sep 4, 2026 · Valuation Sep 5, 2026
What drives JNJ's base case?
base-case thesisJNJ entered 2026 with accelerating sales and raised its annual outlook after another solid quarter. Fast-growing cancer and neuroscience products are already offsetting much of STELARA's decline, while the medical-device business continues to expand more slowly. The case assumes growth gradually cools as the company gets larger, with stable profitability and moderate ongoing investment.
What shapes the assumptions
Raised company sales outlook
Management's 2026 reported-sales growth midpoint is 0.073
Raises revenue growth
Innovative Medicine momentum
Innovative Medicine operational growth was 0.074 in Q1 2026 and 0.068 in Q2 2026
Raises revenue growth
Stable core profitability
Derived first-half 2026 core operating profit was approximately 0.273 of sales
Informs operating margin
Higher factory and equipment spending
First-half capital additions rose from 0.040 of sales in 2025 to 0.048 in 2026
Raises reinvestment
Each driver links a business metric to the forecast assumption it shapes — the basis for this case, not investment advice.
Why the gap?
The market is pricing this as if revenue grows 8.1% a year. Over the last 5 years it grew 1.9% a year — so the price assumes far more than it has delivered.
What else could explain it?›
- Or, holding growth steady
- the price is also consistent with a 31.2% operating margin, against the 27.5% assumed here.
- How confident is this estimate?
- Robustness 55.0/10 (Moderate) — some of any gap is our own uncertainty rather than disagreement.
- What would change the answer?
- Which assumption this valuation swings on, and by how much.
Many combinations of assumptions reproduce the same price. These are ways to read what the market might be expecting, not the market's actual view. How this is worked out
Research & assumptions
Inspect the valuation thesis, cases, risks, evidence, and model inputs.
View details
Research & assumptions
Inspect the valuation thesis, cases, risks, evidence, and model inputs.
Three independently researched cases generated automatically from published financials. Every assumption is justified and cited; the discount rate is computed from researched market inputs.
Company value drivers
Ranked operating metrics and the valuation assumptions they influence.
1. Quarterly reported sales growth
Year-over-year quarterly sales growth shows whether JNJ's combined medicine and device portfolio is accelerating or slowing.
6.6%
reported2. Innovative Medicine quarterly operational growth
Currency-neutral quarterly segment growth measures whether newer medicines are replacing patent-expired and declining products.
6.8%
reported3. MedTech quarterly operational growth
Currency-neutral quarterly MedTech growth tracks procedure demand and adoption of cardiovascular, surgical, vision, and orthopaedic products.
3.6%
reported4. First-half core operating profit margin
This comparable first-half measure tracks profit after product, commercial, research, impairment, and restructuring costs but before interest, taxes, and other non-operating items.
27.3%
derived5. First-half capital additions as a share of sales
Capital additions divided by first-half sales indicate how much physical investment is required to support manufacturing capacity and future growth.
4.8%
derivedBase inputs from financials
source period →Base revenue (TTM)
$97.9B
Diluted shares
2,440,100,000
Net cash
-$16.6B
Bear
low confidence$158.43
IV / share
-43.1% vs $278.43
- Explicit cash flows
- $26.68
- Terminal value
- $138.55
- Net cash
- -$6.80
- Intrinsic value / share
- $158.43
87.5% of the value rests on the terminal value — high dependency. A small change to terminal growth moves the valuation a lot — see terminal growth below.
bear revenue growth (avg 3%) runs well above the trailing -12% trend
Revenue growth5.5% → 3.5% → 2.5% → 2.0% → 1.8%medium
How derived: The forecast starts below management's 0.070 to 0.076 reported-sales guidance for 2026 and then decelerates because STELARA biosimilar competition, weaker MedTech growth, and pricing pressure could outweigh newer products.
Why this confidence: Current management guidance provides a near-term reference point ↑, Patent losses and pipeline outcomes make later years uncertain ↓
Measured by
- Quarterly reported sales growth6.6%reported
- Innovative Medicine quarterly operational growth6.8%reported
- MedTech quarterly operational growth3.6%reported
- First-half capital additions as a share of sales4.8%derived
Evidence for
- MedTech operational sales growth slowed to 0.036 in the second quarter of 2026.[JNJ Q2 2026 results]· primary
- STELARA's decline reduced Innovative Medicine operational growth by approximately 0.076 in the second quarter of 2026.[JNJ Q2 2026 Form 10-Q]· primary
Evidence against
- Management raised 2026 reported-sales guidance to a midpoint of 0.073 growth after second-quarter sales grew 0.066.[JNJ Q2 2026 results]· primary
Operating margin25.0%medium
How derived: Core first-half 2026 operating profit before interest and other non-operating items was approximately 0.273 of sales, and the bear case lowers it to 0.25 for slower growth, MedTech restructuring, pricing pressure, and cost inflation.
Why this confidence: Margin floor is anchored to reported expense lines ↑, Litigation and restructuring costs are volatile ↓
Measured by
- Innovative Medicine quarterly operational growth6.8%reported
- MedTech quarterly operational growth3.6%reported
- First-half core operating profit margin27.3%derived
Evidence for
- First-half 2026 selling, marketing, and administrative expense rose to 0.253 of sales from 0.241 one year earlier.[JNJ Q2 2026 Form 10-Q]· primary
- The company warns that inflation, tariffs, supply-chain complexity, and healthcare cost containment can raise costs or pressure pricing.[JNJ Q2 2026 Form 10-Q]· primary
Evidence against
- The two operating segments generated combined income before tax equal to 0.28 of sales in 2025, up from 0.255 in 2024.[JNJ 2025 Form 10-K]· primary
Tax rate20.0%medium
How derived: The case normalizes above the first-half 2026 effective rate of 0.155 because equity-compensation benefits reduced that rate by 0.029 and global tax changes could lift future cash taxes.
Why this confidence: Two comparable interim tax rates are disclosed ↑, Tax audits, legislation, and discrete benefits can alter the realized rate ↓
No tracked driver measures this assumption yet.
Evidence for
- The company had approximately $2.7 billion of unrecognized tax-benefit liabilities and tax audits underway in several jurisdictions.[JNJ Q2 2026 Form 10-Q]· primary
Evidence against
- JNJ reported effective tax rates of 0.155 for the first half of 2026 and 0.178 for the comparable 2025 period.[JNJ Q2 2026 Form 10-Q]· primary
Reinvestment rate30.0%low
How derived: First-half capital spending increased to approximately 0.048 of sales while inventories and receivables absorbed cash, so this case assumes 0.30 of after-tax operating profit must be reinvested as growth becomes less efficient.
Why this confidence: Capital spending and working-capital movements are directly reported ↑, Acquisitions and expensed research make economic reinvestment difficult to measure ↓
Measured by
- First-half core operating profit margin27.3%derived
- First-half capital additions as a share of sales4.8%derived
Evidence for
- First-half 2026 capital additions were $2.370 billion, while increases in receivables and inventories absorbed $2.949 billion of operating cash.[JNJ Q2 2026 Form 10-Q]· primary
Evidence against
- First-half 2026 depreciation and amortization of $3.963 billion exceeded capital additions, indicating that accounting capital intensity alone does not require such a high reinvestment rate.[JNJ Q2 2026 Form 10-Q]· primary
Terminal growth1.8%low
How derived: The rate is set well below recent sales growth and below the long-term Treasury yield because mature healthcare demand should persist but patent expiry, competition, and price regulation limit perpetual growth.
Why this confidence: The rate is conservatively bounded below the risk-free rate ↑, Perpetual forecasts extend far beyond observable product cycles ↓
Measured by
- Quarterly reported sales growth6.6%reported
Evidence for
- JNJ identifies patent expirations, competition, healthcare cost containment, and regulatory changes as continuing risks to long-run growth.[JNJ 2025 Form 10-K]· primary
Evidence against
- Second-quarter 2026 sales grew 0.066 and management expected annual revenue to exceed $100 billion for the first time.[JNJ Q2 2026 results]· primary
Base
low confidence$244.79
IV / share
-12.1% vs $278.43
- Explicit cash flows
- $34.88
- Terminal value
- $216.71
- Net cash
- -$6.80
- Intrinsic value / share
- $244.79
88.5% of the value rests on the terminal value — high dependency. A small change to terminal growth moves the valuation a lot — see terminal growth below.
base revenue growth (avg 5%) runs well above the trailing -12% trend
Revenue growth7.3% → 5.5% → 5.0% → 4.5% → 4.0%medium
How derived: The first year uses management's 0.073 reported-sales guidance midpoint, followed by gradual normalization as Oncology, Neuroscience, and cardiovascular products offset but do not eliminate mature-product erosion.
Why this confidence: First forecast year follows updated company guidance ↑, Later growth depends on unproven launches and competitive responses ↓
Measured by
- Quarterly reported sales growth6.6%reported
- Innovative Medicine quarterly operational growth6.8%reported
- MedTech quarterly operational growth3.6%reported
- First-half capital additions as a share of sales4.8%derived
Price implies: 8.1% vs our 5.3% — one of several sets that fit this price
Evidence for
- Management raised estimated 2026 reported sales to $100.8 billion to $101.4 billion, representing growth of 0.070 to 0.076.[JNJ Q2 2026 results]· primary
- Innovative Medicine operational growth was 0.068 in Q2 2026, led by Oncology, Immunology, and Neuroscience products.[JNJ Q2 2026 results]· primary
Evidence against
- MedTech operational growth was only 0.036 in Q2 2026, and STELARA's decline imposed an approximately 0.076 drag on Innovative Medicine growth.[JNJ Q2 2026 Form 10-Q]· primary
Operating margin27.5%medium
How derived: The target approximates the first-half 2026 core operating margin of 0.273 and the 2025 segment income-before-tax margin of 0.28, assuming product mix and restructuring savings broadly offset price and launch costs.
Why this confidence: Target is bracketed by two reported profitability measures ↑, Product mix and special charges can move reported profitability materially ↓
Measured by
- Innovative Medicine quarterly operational growth6.8%reported
- MedTech quarterly operational growth3.6%reported
- First-half core operating profit margin27.3%derived
Price implies: 31.2% vs our 27.5% — one of several sets that fit this price
Evidence for
- Combined segment income before tax improved from 0.255 of sales in 2024 to 0.28 in 2025.[JNJ 2025 Form 10-K]· primary
Evidence against
- First-half 2026 selling, marketing, and administrative expense rose by 0.012 of sales year over year.[JNJ Q2 2026 Form 10-Q]· primary
Tax rate17.5%medium
How derived: The assumption is close to the 2025 full-year effective rate of approximately 0.177 and the first-half 2025 rate of 0.178, while treating the lower 2026 interim rate as partly temporary.
Why this confidence: Assumption matches recent normalized reported rates ↑, Geographic income mix and discrete tax items remain variable ↓
No tracked driver measures this assumption yet.
Evidence for
- The 2025 provision for income taxes was $5.777 billion on $32.581 billion of pretax income, an effective rate of approximately 0.177.[JNJ 2025 Form 10-K]· primary
Evidence against
- The first-half 2026 effective rate fell to 0.155, although share-based compensation benefits reduced it by 0.029.[JNJ Q2 2026 Form 10-Q]· primary
Reinvestment rate24.0%low
How derived: The model retains 0.24 of after-tax operating profit for capital spending, working capital, and pipeline support, reflecting higher first-half capital intensity but also depreciation above capital additions.
Why this confidence: Recent capital and working-capital data are available ↑, Drug research is expensed and acquisitions are irregular ↓
Measured by
- First-half core operating profit margin27.3%derived
- First-half capital additions as a share of sales4.8%derived
Evidence for
- Capital additions increased from $1.838 billion in the first half of 2025 to $2.370 billion in the first half of 2026.[JNJ Q2 2026 Form 10-Q]· primary
Evidence against
- First-half 2026 depreciation and amortization exceeded capital additions by $1.593 billion.[JNJ Q2 2026 Form 10-Q]· primary
Terminal growth2.3%low
How derived: The rate assumes JNJ's diversified healthcare portfolio can grow modestly faster than the bear case but substantially slower than its current sales pace once products and markets mature.
Why this confidence: Diversification supports durability ↑, The assumption extends beyond observable patent and pipeline periods ↓
Measured by
- Quarterly reported sales growth6.6%reported
Evidence for
- JNJ operates across Innovative Medicine and MedTech, and both segments reported positive growth in 2025 and the first half of 2026.[JNJ Q2 2026 results]· primary
Evidence against
- The company identifies patent expirations, reimbursement pressure, technological competition, and uncertain clinical success as material long-run risks.[JNJ 2025 Form 10-K]· primary
Bull
low confidence$345.55
IV / share
+24.1% vs $278.43
- Explicit cash flows
- $41.25
- Terminal value
- $311.10
- Net cash
- -$6.80
- Intrinsic value / share
- $345.55
90.0% of the value rests on the terminal value — high dependency. A small change to terminal growth moves the valuation a lot — see terminal growth below.
bull revenue growth (avg 6%) runs well above the trailing -12% trend
Revenue growth7.6% → 7.0% → 6.5% → 5.5% → 5.0%low
How derived: The first year uses the top of 2026 guidance and subsequent years assume rapid Oncology, Neuroscience, Immunology, and cardiovascular adoption more than offsets patent erosion and slower legacy MedTech categories.
Why this confidence: Several large products have directly reported rapid growth ↑, Sustaining elevated portfolio growth for five years requires multiple successful launches ↓
Measured by
- Quarterly reported sales growth6.6%reported
- Innovative Medicine quarterly operational growth6.8%reported
- MedTech quarterly operational growth3.6%reported
- First-half capital additions as a share of sales4.8%derived
Evidence for
- Q2 2026 Oncology operational sales grew 0.161, including growth of 0.176 for DARZALEX and 0.477 for CARVYKTI.[JNJ Q2 2026 Form 10-Q]· primary
- Q2 2026 TREMFYA, SPRAVATO, and CAPLYTA operational sales grew 0.71, 0.40, and 0.709, respectively.[JNJ Q2 2026 Form 10-Q]· primary
Evidence against
- Q2 2026 MedTech operational growth was 0.036, while STELARA sales fell 0.557 operationally.[JNJ Q2 2026 Form 10-Q]· primary
Operating margin29.5%low
How derived: The target rises above the recent core level because the bull case gives more weight to high-growth Innovative Medicine, whose 2025 segment income-before-tax margin was 0.369, and assumes MedTech restructuring improves efficiency.
Why this confidence: Innovative Medicine demonstrates substantial incremental profit potential ↑, The target requires favorable mix and successful restructuring ↓
Measured by
- Innovative Medicine quarterly operational growth6.8%reported
- MedTech quarterly operational growth3.6%reported
- First-half core operating profit margin27.3%derived
Evidence for
- Innovative Medicine generated 2025 segment income before tax equal to 0.369 of segment sales, up from 0.332 in 2024.[JNJ 2025 Form 10-K]· primary
- JNJ began restructuring its Surgery franchise to exit non-strategic products and optimize selected sites.[JNJ FY2025 results]· primary
Evidence against
- MedTech's 2025 segment income-before-tax margin was only 0.122, and first-half 2026 administrative spending increased as a share of sales.[JNJ 2025 Form 10-K]· primary
Tax rate16.0%low
How derived: The assumption stays near the first-half 2026 effective rate of 0.155, allowing only modest normalization because the bull case assumes continued geographic and equity-compensation tax benefits.
Why this confidence: Current reported rate directly supports the assumption ↑, Discrete benefits and international tax changes reduce persistence ↓
No tracked driver measures this assumption yet.
Evidence for
- JNJ's worldwide effective tax rate was 0.155 in the first half of 2026.[JNJ Q2 2026 Form 10-Q]· primary
Evidence against
- Share-based compensation reduced the first-half 2026 effective rate by 0.029, making part of the observed benefit potentially non-recurring.[JNJ Q2 2026 Form 10-Q]· primary
Reinvestment rate20.0%low
How derived: Although capital spending is rising, the case assumes strong returns from existing drug platforms and acquired products allow faster growth while reinvesting only 0.20 of after-tax operating profit.
Why this confidence: High-margin medicines can scale without proportional physical investment ↑, Fast growth may require acquisitions, launch spending, and additional working capital ↓
Measured by
- First-half core operating profit margin27.3%derived
- First-half capital additions as a share of sales4.8%derived
Evidence for
- First-half 2026 depreciation and amortization of $3.963 billion exceeded capital additions of $2.370 billion, indicating limited net physical-capital requirements.[JNJ Q2 2026 Form 10-Q]· primary
Evidence against
- Capital additions rose 0.289 year over year in the first half of 2026, and receivables plus inventories absorbed $2.949 billion of cash.[JNJ Q2 2026 Form 10-Q]· primary
Terminal growth2.8%low
How derived: The rate assumes JNJ's two healthcare platforms, broad pipeline, and aging-population exposure preserve above-base growth, while remaining below the current Treasury yield and recent company growth.
Why this confidence: Two diversified healthcare platforms support resilience ↑, Small changes in a perpetual assumption materially affect value ↓
Measured by
- Quarterly reported sales growth6.6%reported
Evidence for
- JNJ reported growth across both Innovative Medicine and MedTech and highlighted approvals or advanced programs in Immunology, Neuroscience, Oncology, electrophysiology, and robotic surgery.[JNJ Q2 2026 results]· primary
Evidence against
- The company's disclosures identify patent challenges, uncertain clinical and commercial success, pricing pressure, and technological competition as persistent risks.[JNJ 2025 Form 10-K]· primary
Valuation robustness
reliability of the estimate, not a stock rating55 / 100 · Moderate
Formula v1.0.0. Higher means a more reliable estimate — not a recommendation.
Quality checks
Automated model-risk flags — warnings, not recommendations.
- 89% of the intrinsic value rests on the terminal value — a small change to terminal growth moves the valuation a lot.→ terminal growth
- The reinvestment assumption is low-confidence.→ reinvestment
- The terminal growth assumption is low-confidence.→ terminal growth
Per-share economics
Business growth after changes in the diluted share count.
| Period | Revenue growth | FCF/share | FCF/share growth | Shares | Share growth |
|---|---|---|---|---|---|
| Q3 2024 | 5.2% | 2.87 | 12.1% | 2.43B | -4.8% |
| Q1 2025 | 2.4% | 1.39 | 18.9% | 2.42B | -0.3% |
| Q2 2025 | 5.8% | 1.17 | -39.1% | 2.42B | -0.1% |
| Q3 2025 | 6.8% | 3.3 | 15.0% | 2.43B | 0.0% |
| Q1 2026 | 9.9% | 0.6 | -57.0% | 2.45B | 0.9% |
| Q2 2026 | 6.6% | 2.99 | 155.1% | 2.44B | 0.9% |
Valuation history every run
History builds as the valuation is recalculated — this is the first recorded run.
Market inputs researched
The latest available U.S. Treasury daily par-yield table reports a 10-year yield of 0.0478 on September 4, 2026.
The latest published trailing-twelve-month adjusted-payout estimate from Aswath Damodaran was 0.0418 on June 1, 2026.
JNJ's latest available closing share price was $275.39 on September 4, 2026.
Generated 9/5/2026, 11:16:38 AM · pipeline v1.2.0