Johnson & Johnson’s (NYSE:JNJ) most recent earnings announcement in December 2017 indicated that the business experienced a significant headwind with earnings falling by -92.14%. Investors may find it useful to understand how market analysts predict Johnson & Johnson’s earnings growth outlook over the next few years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings. See our latest analysis for Johnson & Johnson
Analysts’ expectations for this coming year seems buoyant, with earnings growth more than doubling. Earnings continue to grow strongly in the next couple of years, finally generating US$21.63B in 2021.
While it’s useful to understand the growth rate each year relative to today’s value, it may be more beneficial to analyze the rate at which the company is moving every year, on average. The benefit of this approach is that we can get a better picture of the direction of Johnson & Johnson’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I’ve appended a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 28.34%. This means that, we can expect Johnson & Johnson will grow its earnings by 28.34% every year for the next couple of years.
For Johnson & Johnson, there are three fundamental factors you should further examine:
- 1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- 2. Valuation: What is JNJ worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether JNJ is currently mispriced by the market.
- 3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of JNJ? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.