Here's Why We Think Johnson & Johnson (NYSE:JNJ) Is Well Worth Watching
Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
In contrast to all that, I prefer to spend time on companies like Johnson & Johnson (NYSE:JNJ), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
View our latest analysis for Johnson & Johnson
How Fast Is Johnson & Johnson Growing Its Earnings Per Share?
Over the last three years, Johnson & Johnson has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Over twelve months, Johnson & Johnson increased its EPS from US$6.40 to US$6.79. That amounts to a small improvement of 6.1%.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Johnson & Johnson maintained stable EBIT margins over the last year, all while growing revenue 13% to US$91b. That's progress.
In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.
Fortunately, we've got access to analyst forecasts of Johnson & Johnson's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Johnson & Johnson Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$422b company like Johnson & Johnson. But we do take comfort from the fact that they are investors in the company. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$262m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!
Should You Add Johnson & Johnson To Your Watchlist?
As I already mentioned, Johnson & Johnson is a growing business, which is what I like to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. It is worth noting though that we have found 1 warning sign for Johnson & Johnson that you need to take into consideration.
Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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