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Quote this valuation with its source: Fair value, Potential value and the price at analysis.
FAQ
JNJ — frequently asked questions
Is Johnson & Johnson overvalued?
In our latest published analysis dated 2026-09-21, JNJ looks meaningfully undervalued. The price recorded at analysis is USD 270 versus our fair value of USD 346; the high endpoint is presented separately as potential value of USD 530. That implies roughly 28.0% upside to fair value at that date.
Our latest published report, analyzed 2026-09-21, gives JNJ a fair value of USD 346 and a potential value of USD 530. The conclusion is triangulated across multiple valuation models and weighted by reliability for Johnson & Johnson's archetype; it is a dated research output, not a live price.
Should I buy JNJ now?
Our latest published rating for JNJ, analyzed 2026-09-21, is Buy. Johnson & Johnson looks meaningfully undervalued at the analysis-date price of USD 270 versus fair value of USD 346; potential value is USD 530. This is research for educational purposes, not personalized investment advice.
What are the biggest risks for JNJ?
The dedicated bear-case section in our report analyzed 2026-09-21 documents Johnson & Johnson's material risks, evidence, thresholds, and thesis-invalidation conditions. Scenario-specific explanations remain in that section so the report does not repeat or decontextualize them elsewhere.
What is JNJ's rating?
Our latest published rating for JNJ, analyzed 2026-09-21, is Buy, with a published moat assessment of 9/10 (Wide). It reflects our fair value of USD 346, the potential value of USD 530, and the price recorded at analysis (USD 270).
Commercial acceleration of next-generation oncology and immunology therapeutics, where INLEXZO has captured 1 in 3 eligible new patients with 29% sequential quarterly growth and TREMFYA holds >50% induction share in Crohn's disease, combined with the submission of the OTTAVA surgical robotics platform, driving multi-year revenue expansion toward Potential value of $530.18.
Main risk
Loss of exclusivity and accelerated biosimilar penetration across core oncology and immunology biologics reducing Innovative Medicine annual revenue growth below 2.0% YoY.
We rate Johnson & Johnson Buy. The business generates durable cash flows across pharmaceuticals and medical devices that support substantial upside to Fair value.
Our Buy rating reflects an attractive investment opportunity for long-term investors seeking capital growth and dependable dividend income from an established healthcare leader.
This report was prepared at a price of $269.99 on September 18, 2026. Against this level, our Fair value is $345.55, representing an upside of 27.99%. Under an accelerated growth scenario where commercial launches outperform, the business offers Potential value of $530.18.4
The principal risk to our view is that loss of exclusivity on key biologic medicines accelerates faster than new therapies can replace them, dropping Innovative Medicine sales growth below 2.0% annually. If that occurred, investors would see operating margins compress from 34.9% toward 24.4%, reducing operating cash flow and weakening shareholder returns.7
The primary driver of upside is that commercial adoption of newly approved oncology and immunology treatments accelerates, evidenced by INLEXZO capturing one in three eligible new patients and TREMFYA securing over 50% induction share in Crohn's disease. Expanding therapeutic volume lifts consolidated revenue toward $108,769M by FY2027 and drives diluted earnings per share to $12.45, increasing cash flow and intrinsic value per share.1,5
Therapeutic Pipeline Momentum
Accelerated adoption of INLEXZO and TREMFYA offsets mature patent expirations, supporting consensus revenue growth toward $108,769M in FY2027.1,5
Operating cash flow of $24,530M and modest net debt of $21,336M ensure secure dividend funding ($5.36 per share) and capital reinvestment flexibility.6
Intangible Assets (Therapeutic Patents, Biologic Approvals, and Regulatory Protections)
Innovative Medicine delivered $60,401M in FY2025 revenue, supported by commercial market leadership including TREMFYA with over 50% induction share in Crohn's disease and rapid INLEXZO uptake capturing one in three eligible patients.
House recommendation
Johnson & Johnson is rated Buy because resilient commercial adoption across high-margin oncology and immunology therapies provides 27.99% upside to our Fair value of $345.55.
Company overview
RCSC meetings include discussions of specific risk areas throughout the year including, among others, those relating to cybersecurity. The CISO provides quarterly updates each year to RCSC on cybersecurity matters. The Company is organized into two business segments: Innovative Medicine and MedTech. The Innovative Medicine segment is focused on the following therapeutic areas: Oncology, Immunology, Neuroscience, Pulmonary Hypertension, Infectious Diseases, and Cardiovascular and Metabolism. Products in this segment are distributed directly to retailers, wholesalers, distributors, hospitals and healthcare professionals for prescription use.
The Innovative Medicine segment is focused on the following therapeutic areas: Oncology, Immunology, Neuroscience, Pulmonary Hypertension, Infectious Diseases, and Cardiovascular and Metabolic.
In a stress scenario evaluating combined biopharmaceutical patent expirations, distributor fee renegotiations across top US wholesalers, and capital cost normalization toward the healthcare sector beta of 0.9828, Johnson & Johnson's earnings trajectory faces measurable compression. Under bear case conditions, annual revenue growth decelerates toward 2.1%, normalized operating margins compress from 34.9% toward 24.4%, and the computed cost of equity rises to 9.07%. Even under these stressed assumptions, JNJ's balance sheet resilience, supported by modest total debt of $49,036M as of 2026-09-21 and FY2025 operating cash flow of $24,530M, protects enterprise solvency and establishes downside support at $224.94.
Johnson & Johnson commands a wide competitive moat underpinned by vast intellectual property intangible assets in Innovative Medicine and extensive switching costs across hospital systems in MedTech. In FY2025, Innovative Medicine generated $60,401M in revenue, representing 64.12% of consolidated sales, driven by leadership in oncology and immunology. The company's therapeutic portfolio achieves high profitability, evidenced by consolidated FY2025 operating income of $25,596M on total revenue of $94,193M.
The MedTech segment, generating $33,792M in FY2025 revenue, strengthens moat durability through high physician switching costs, specialized surgical instrumentation, and expanding robotic platforms including OTTAVA. Combined with a global commercial infrastructure across Europe ($21,535M) and Asia-Pacific/Africa ($14,031M), JNJ sustains a defensible 20-year competitive advantage horizon.
The highlighted cell is Fair value when every assumption sits at its base level ($345.55). Each row and column shows what Fair value becomes when one assumption moves.
Free cash flow to the firm stays positive in the first projected year at $29.7B after modeled reinvestment of $0, with terminal value at 41.5% of enterprise value. A sudden drop in free cash flow is not projected unless capital spending relative to , reinvestment, or resets materially.
Upgrade to Strong Buy; Expand allocation toward the upper portfolio weighting boundary, verify prescription initiation depth in quarterly disclosures, and monitor commercialization execution across international channels.
Trigger: Innovative Medicine revenue growth accelerating above consensus expectations driven by new patient starts, accompanied by operating margin expansion in MedTech.
Commercial outperformance across newly launched therapeutic assets validates pipeline replacement velocity, expanding projected multi-year cash flows and increasing intrinsic value toward Potential value $530.18.
In-line
Maintain Buy; Maintain planned position sizing, reinvest dividend distributions, and continue monitoring distributor working capital conversion and pipeline regulatory milestones.
The healthcare sector exhibits capital expenditure to revenue of 0.011 (1.1%) and capex to depreciation of 0.8. JNJ deployed $4,832M in FY2025 CapEx against depreciation of $7,503M, demonstrating disciplined physical asset reinvestment while prioritizing research and development.6
Bull cycle
Demographic aging across major economies, increasing chronic disease prevalence, and expanding procedure volumes in robotic and orthopedic surgery sustain secular demand expansion for premium biopharmaceuticals and advanced MedTech devices.
Bear cycle
Coordinated statutory healthcare price controls, patent expirations on high-margin biologic blockbusters, and hospital capital budgeting constraints compress net selling prices and delay device replacement cycles.
§11 Position management
Sizing
4-6%
Johnson & Johnson's AAA credit balance sheet, modest leverage ($49,036M total debt), and wide economic moat support a core holding allocation of 4-6% within a diversified equity portfolio. Stable cash conversion and defensive non-discretionary demand justify steady position sizing.4
Risk
Risk is actively managed by monitoring therapeutic concentration, distributor counterparty exposure, and balance sheet strength. With the top three wholesalers representing 48.4% of revenue, credit terms and receivables are audited quarterly. Capital allocation discipline ensures leverage remains low (total debt of $49,036M) and ample liquidity is maintained.
§12 Investor perspectives
Fundamental Valuation
Buy
Trading at $269.99 on 2026-09-18, the stock trades at an attractive discount to our Fair value of $345.55 and offers long-term upside toward Potential value of $530.18 anchored by verified FY2027 consensus EPS of $12.45.1,4
Income and Quality
Buy
Johnson & Johnson's AAA credit balance sheet, modest net debt of $21,336M, and consistent operating cash flow generation of $24,530M provide unmatched capital protection and dependable dividend compounding for defensive compounder portfolios.6
Risk-Adjusted Catalyst
§14 Final recommendation
Action
Buy
We recommend a Buy rating on Johnson & Johnson based on a report-date price of $269.99 as of 2026-09-18 relative to our synthesized Fair value of $345.55, representing an attractive 27.99% upside potential.4
Johnson & Johnson's wide economic moat, supported by $60,401M in FY2025 Innovative Medicine sales and $24,530M in operating cash flow, provides durable earnings growth and balance sheet security that easily absorbs patent transition risks.
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Sources
The records this analysis drew on, as they stood when it was run.
Analyst consensusData as of 2026-09-21 · Published 2026-09-21 · Provider-adjusted · cited for 2 figuresCited in Executive summary, Investor perspectives
Loss of exclusivity on major biologic therapeutics outpaces commercial volume replacement from newly launched therapies.
Major pharmaceutical wholesalers demand higher distribution service fees and extend trade payment terms.
Cost of capital normalizes toward broader healthcare sector levels, dampening long-horizon multiple expansion.
The Bear scenario models downside operational risks driven by accelerated generic and biosimilar competition on key biopharmaceutical franchises, combined with customer margin renegotiation across domestic pharmaceutical distributors and persistent regulatory pricing caps in international markets. Under these stressed conditions, top-line growth decelerates, operating margins compress, and broader multiple contraction lowers intrinsic earnings power. Detailed downside valuation levels, capital-cost sensitivities, and stress-test assumptions are evaluated exclusively within the dedicated downside assessment section.
Ways this thesis can break
Market normalizes JNJ's beta from its anomalous raw level of 0.2184 toward the healthcare sector beta of 0.9828, driving computed WACC above 9.0% and triggering broad multiple contraction across long-horizon DCF models.
Current WACC of 7.0702% and moderate Ke of 7.2551% rely on a low raw beta of 0.2184 rather than the sector beta of 0.9828 or industry levered beta of 0.98. If beta normalizes toward sector levels, higher capital costs reduce model valuations by 24.2% to 32.5%.2
FV impact
-24.2%
Cost of capital 2 points higher
Trigger
Within 18 months
Terminal P/E multiple compresses by 20% toward biopharma peer levels as patent expirations and MedTech competition reduce long-term earnings durability.
Top three US pharmaceutical wholesalers representing 48.4% of revenue demand higher distribution fees and extend payment terms, permanently lowering cash flow growth by 1 percentage point.
Top three wholesalers account for 21.8%, 15.5%, and 11.1% of revenue respectively, and FY2025 operating cash flow of $24,530M lagged net income of $26,804M. Channel friction and fee renegotiations could reduce cash flow growth rate by 100 bps.6,7
Early-warning signals to monitor
The five developments that would weaken our investment case.
Johnson & Johnson's return on invested capital of 17.73% comfortably exceeds its computed WACC of 7.0702% and cost of equity of 7.2551%, generating an economic spread of over 1,000 basis points supported by $26,804M in FY2025 net income.2,6
9/ 10
Wide
Sources of advantage
01Intangible Assets (Therapeutic Patents, Biologic Approvals, and Regulatory Protections) — Innovative Medicine delivered $60,401M in FY2025 revenue, supported by commercial market leadership including TREMFYA with over 50% induction share in Crohn's disease and rapid INLEXZO uptake capturing one in three eligible patients.Wide
02Switching Costs across Hospital Systems and Surgical Ecosystems — MedTech contributed $33,792M in FY2025 revenue, where clinical workflows, institutional clinician training, and capital platforms create substantial procedural switching barriers.Wide
03Scale Advantage in Global Distribution and Commercial Infrastructure — Geographic infrastructure supports $53,752M in US revenue alongside $21,535M in Europe and $14,031M in Asia-Pacific/Africa.Moderate
Limitation: Terminal value is 75.9% of this model's value, above the 60% level at which the methodology flags concentration; the value leans on the years beyond the explicit forecast.
Convert the revenue and margin path into after-tax free cash flow, discount the annual per-share amounts and at , then adjust for signed per current share.
Consolidated revenue compounds at a mid-single-digit pace consistent with consensus expectations.
Operating margins remain durable near historical levels, balancing R&D reinvestment with cost efficiencies.
Distributor working capital dynamics remain orderly without structural fee or inventory disruptions.
The Base case reflects our modal underwriting expectation, where disciplined commercial execution in Innovative Medicine balances anticipated loss-of-exclusivity patent expirations. Steady procedure growth across MedTech hospital ecosystems and stable geographic demand across Europe and Asia support steady cash flow compounding. Intrinsic value reaches Fair value $345.55, representing an upside of 28.0% from $269.99 (as of 2026-09-18) with an expected return of 28.0% at a assigned probability of 60.0%.
The Bull case envisions accelerated biopharmaceutical commercial adoption and expanding MedTech procedure volumes. In this outcome, newly launched therapeutics capture leading market share across immunology and oncology indications, while surgical robotics platforms achieve timely regulatory clearances and hospital integration. Consolidated revenue growth outpaces baseline expectations and operating margins expand, driving the valuation target to Potential value $530.18 with an implied return of 96.4% at an estimated likelihood of 20.0%.
Trigger: Revenue and diluted earnings per share align with published consensus expectations, with segment margins steady across biopharma and medical technology.
Financial performance confirms the baseline compounder underwriting path, supporting Fair value $345.55 and validating the house Buy thesis.
Miss
Downgrade to Hold; Pause incremental capital deployment, audit segment gross margins and distributor accounts receivable in the subsequent quarterly filing, and reassess long-term terminal multiple durability.
Trigger: Innovative Medicine revenue growth decelerating meaningfully below baseline expectations due to accelerated loss of exclusivity, coupled with distributor margin clawbacks.
Revenue deceleration and gross margin contraction indicate that biosimilar erosion is outpacing new drug adoption, impairing medium-term earnings power and compressing valuation multiples.
Earnings quality is high, characterized by strong cash conversion where operating cash flow closely tracks reported net income. Working capital requirements show minor periodic fluctuations from distributor receivable timing, but accounts receivable aging and inventory levels remain consistent with historic norms. Conservative depreciation schedules and minimal non-operating adjustments ensure that reported operating income accurately reflects underlying economic cash earnings.
Metrics to watch into the print
01
Metric:
Innovative Medicine New Therapy Uptake and Volume Growth
CurrentNew therapies demonstrate robust commercial traction with rapid new account adoption and leading patient share in key indications.
Why it matters
Measures whether commercial adoption of recently launched therapeutics offsets loss of exclusivity on mature biologics, preserving top-line growth and segment margins.
02
Metric:
MedTech Surgical Robotics Regulatory Clearances and Clinical Milestones
CurrentRegulatory review is actively progressing following late-stage regulatory filing alongside scheduled clinical trial readouts.
Why it matters
Commercial progression of the robotic surgery pipeline determines whether MedTech can accelerate revenue growth and enhance hospital ecosystem switching costs.
03
Metric:
Top Three Wholesaler Concentration and Cash Flow Conversion
CurrentCash flow realization remains solid with high net income conversion despite significant distributor concentration.
Why it matters
Reveals whether concentrated distributor intermediaries create working capital drag through inventory destocking or extended payment terms.
04
Metric:
International Revenue Trajectory and Pricing Resilience
Johnson & Johnson's cash flow generation is characterized by high predictability and strong net income conversion. In FY2025, operating cash flow of $24,530M represented 91.5% of net income ($26,804M). Free cash flow after $4,832M in capital expenditures totaled $19,698M. Working capital dynamics showed minor elongation from distributor receivables, but collection cycles and inventory turns remain healthy.6
Capital allocation balances disciplined organic reinvestment, strategic pipeline tuck-ins, and consistent shareholder returns. Capital expenditures of $4,832M in FY2025 represent 5.13% of revenue, reflecting the asset-light nature of biopharmaceutical development. With total debt of $49,036M as of 2026-09-21, JNJ maintains pristine balance sheet strength, enabling dividend payments and targeted technology acquisitions without credit degradation.
Johnson & Johnson's return on invested capital remains consistent following the separation of its consumer healthcare business, demonstrating disciplined capital deployment into high-margin pharmaceutical and medical technology franchises.
Latest ROIC of 17.73% substantially exceeds the computed WACC of 7.0702% and moderate cost of equity of 7.2551%, delivering an economic spread of 10.66 percentage points that confirms wide-moat value generation.
Johnson & Johnson (JNJ) trades at 21.1x forward earnings against a peer median of 15.6x. Its EV/EBITDA of 19.5x compares with a peer median of 14.4x. The comparison uses 4 peers: Amgen Inc., Biogen Inc., Merck & Co. Inc. and UnitedHealth Group Incorporated, as of 2026-09-21.
Secular trends
Trend
Impact
Note
Therapeutic biopharmaceutical innovation in oncology and immunology
positive
Novel biologics and targeted therapies command pricing power and volume expansion where clinical unmet needs remain high.
Governmental drug price negotiation and statutory healthcare cost containment
negative
Legislative pricing pressure in the United States and statutory price caps across Europe constrain real drug price growth over product lifecycles.
Clinical transition toward robotic-assisted surgery and digitally integrated medical technology
positive
Hospitals increasingly invest in automated surgical platforms to improve procedural efficiency and patient outcomes.
Positioning
With $94,193M in FY2025 revenue diversified across Innovative Medicine ($60,401M) and MedTech ($33,792M), Johnson & Johnson occupies an established global position capable of navigating localized regulatory reimbursement shifts.6,7
Entry tranches
Level
Action
Why
$260.00 - $270.00
Initial tranche deployment
Represents attractive entry near current trading levels ($269.99), capturing a >20% discount to house Fair value of $345.55.
$240.00 - $250.00
Secondary accumulation tranche
Offers an enhanced margin of safety, pricing in severe biopharma patent cliff assumptions and expanding upside beyond 38%.
Exit tranches
Level
Action
$345.00 - $355.00
Trim 25% of position to rebalance portfolio allocation as shares converge with house Fair value ($345.55).
$500.00 - $530.00
Trim additional 50% as shares approach Potential value ($530.18) and risk-reward profile becomes symmetric.
Not every cited input appears here: internal calculations and intermediate model outputs have no external record, and some citations could not be matched to one.
Terminal multiple 20% lower
Trigger
Within 24 months
FV impact
-8.5%
Terminal growth 1 point lower
Trigger
Within 24 months
Under the moderate discount rate, $111 comes from forecast-period earnings and $268 from the long-term value, totaling $379.
