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Johnson & Johnson Message Board

  • cdanajackson cdanajackson Feb 12, 2010 4:09 AM Flag

    Fair value calculation using discounted cash flow model

    Using conservative estimates and Warren Buffet's favorite metric based on "owner earnings", I ran a discounted cash flow model on JNJ stock and I find it to be about 30% undervalued.

    Here are the particulars I used in my calculation:

    5-year est. owner earnings growth rate=7.73%
    years 6-8 owner earnings growth rates=6%,5%,4%
    long term growth rate after year 8=3%

    After running these numbers through my speadsheet, I come up with a fair value of $85.05, net total debt.

    If that number seems high, remember JNJ is a cash cow that has a history of using its cash to create shareholder value.

    Please feel free to comment.

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101.13+0.31(+0.31%)May 27 4:00 PMEDT