Johnson & Johnson (JNJ) Vs. Procter & Gamble (PG): Which is the Better Stock?
Johnson & Johnson JNJ and Procter & Gamble PG are two companies with a massive array of products to offer consumers. Johnson & Johnson has more of a health related focus across its product lines, which includes names such as Neutrogena, Listerine, Tylenol, Rogaine, and Splenda. On the other hand, Procter & Gamble has a general focus on branded consumer packaged goods, with household names like Crest, Gillette, Pampers, Vicks, and Pantene.
These two companies are competing with each other across dozens of products. So which company makes for a better investment opportunity? JNJ and PG have market caps of $293.1 billion and $224.64 billion, respectively. That alone doesn’t tell you which company makes for a better investment, though.
In order to determine which stock warrants a buy, it is important to consider statistics which acknowledge growth, value, and earnings dependability.
Growth
There is a clear difference between these two companies’ potential to grow. Johnson & Johnson’s EPS is projected to grow by 4.84% this year, while PG’s EPS is projected to shrink by 10.28%. JNJ seems to have the upper hand on PG as far as profitability is concerned as well, as it has a net margin of 21.99%. Procter has a net margin of just 12.23%.
PG’s sales are projected to decrease by 15.34% this year, while JNJ sees modest sales growth of 1.35%. JNJ has an ROE of 24.77%, which significantly outpaces PG’s ROE of 18.26%. Clearly, Johnson & Johnson beats Procter & Gamble in terms of fundamental growth metrics.
Value
Procter & Gamble beats JNJ on price-to-sales. These companies trade at a P/S of 4.2 and 3.24, respectively. PG is also ahead when it comes to price-to-book, as it has a P/B of 3.69. On the other hand, Johnson & Johnson trades at a price-to-book multiple of 4.15.
For the rest of the valuation statistics, JNJ dominates PG across the board. Johnson & Johnson has an EV/EBITDA and PEG of 11.45 and 2.94, respectively, while PG lags in those same metrics, having EV/EBITDA and PEG of 14.68 and 3.72. It’s worth noting that PG has a debt-to-equity of 0.29, while JNJ’s is 0.18. Johnson & Johnson trades at a forward price-to-earnings multiple of 16.42, while PG’s forward PE is 23.04.
Earnings
Johnson has a clear advantage as far as growth and valuation metrics are concerned. By now, you may not be too surprised to find out that it also has PG beaten on the earnings front.
Johnson & Johnson has had mixed earnings estimate revisions from analysts over the last 60 days. There have been three analysts revising their estimates upwards, while two analysts have revised their earnings forecast downwards for the current quarter. JNJ has beaten our EPS consensus estimate in each of the last four quarters. Our earnings consensus currently estimates earnings of $1.64 per share this quarter.
PG has seen a slew of negative earnings estimate revisions over the last 60 days. In that time frame, eight analysts have revised their earnings estimates downwards. No analysts have revised their earnings estimates upwards. Our EPS consensus has trended lower across the last 90 days, going from $0.93 to $0.81.
Bottom Line
This is a lopsided battle. Not only is JNJ expected to grow at a faster pace than PG, but it also trades at a discount relative to its expected earnings. The deathblow to PG is the fact that there has been nothing but negative revisions from analysts. Earnings, growth, and valuation metrics should always be considered before deciding whether or not you should buy a company’s shares. It’s no wonder why PG is a Zacks Rank #4 (Sell) and JNJ is a Zacks Rank #2 (Buy).
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JOHNSON & JOHNS (JNJ): Free Stock Analysis Report
PROCTER & GAMBL (PG): Free Stock Analysis Report
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