Johnson & Johnson is a 141,700-employee healthcare holding company operating two segments, Innovative Medicine (immunology, oncology, neuroscience, infectious disease, cardiovascular and metabolism, pulmonary hypertension) and MedTech (interventional solutions, orthopaedics, surgery, vision), founded in 1887 and headquartered in New Brunswick, New Jersey.
JNJ
· Healthcare · Drug Manufacturers - General
· Market cap $652.31B
QuantHub Original Research · Updated 2026-09-25
·
High QualityA-tier business, C-tier valuation with only 5.7% upside to $286.05 fair value.Fair Value
JNJ is trading near fair value. No urgent action needed.
QuantHub Research: Investment Thesis
Maturing Phase
Johnson & Johnson is a 141,700-employee healthcare holding company operating two segments, Innovative Medicine (immunology, oncology, neuroscience, infectious disease, cardiovascular and metabolism, pulmonary hypertension) and MedTech (interventional solutions, orthopaedics, surgery, vision), founded in 1887 and headquartered in New Brunswick, New Jersey. Business quality is high on fundamentals: TTM gross margin of 67.9%, TTM operating margin of 26.8%, TTM net margin of 21.5%, ROE of 25.7%, and free cash flow of $7.67 per share on revenue of $40.64 per share, with revenue growth of 6.6% year over year in the most recent quarter. The problem is price and trajectory: at $270.68 the shares trade at 31.4x trailing earnings, 6.66x sales, 35.31x free cash flow and 20.19x EV/EBITDA, a very expensive regime versus the company's own five-year history, while reported net earnings slipped 0.1% year over year in the most recent quarter and STELARA revenue fell 55.2% to $740 million as biosimilars took hold. Blended fair value of $286.05 implies only 5.7% upside, and the sell-side average target of $320 implies 18.2% upside, so the market is paying a premium multiple for a maturing, litigation-burdened compounder whose growth is being offset by patent cliffs. The stock is modestly undervalued versus blended fair value but expensive versus its historical multiple range, and the risk-reward is roughly balanced rather than compelling.
JNJ is expensive versus its own history, sitting in a very expensive valuation regime at 31.4x trailing earnings, 6.66x sales, 35.31x free cash flow and 20.19x EV/EBITDA, and it carries a roughly 30% P/E premium to AbbVie on an FY1 basis (24.2x versus 18.8x). The premium is defensible on quality grounds, since JNJ pairs a diversified Innovative Medicine portfolio with a MedTech franchise and has raised its dividend for 70 straight years, but it is hard to justify on growth grounds when revenue rose only 6.6% year over year in the most recent quarter and reported net earnings declined 0.1%. The market appears to be pricing JNJ as a defensive, dividend-compounding safe haven rather than as a growth story, which is why the shares sit close to blended fair value of $286.05 with just 5.7% upside even as the sell-side consensus Buy rating carries an average target of $320, implying 18.2% upside. The gap between the fair-value estimate and the analyst target reflects disagreement about how quickly the pipeline can offset STELARA biosimilar erosion and talc litigation overhang.
12–18 Month Outlook
In 18 months JNJ is likely still a high-quality but slow-growing healthcare compounder working through the STELARA cliff. Revenue growth of 6.6% year over year in the most recent quarter shows the base business can expand, but reported net earnings declined 0.1% and biosimilars cut worldwide operational sales growth by roughly 4.6 percentage points, so earnings progress depends on pipeline launches and MedTech execution rather than on the legacy immunology franchise. The valuation is the constraint: at 31.4x trailing earnings and 35.31x free cash flow, the shares already discount a lot of stability, and with only 5.7% upside to the $286.05 fair value estimate the stock is modestly undervalued versus blended fair value but expensive versus its own five-year multiple range. The talc litigation reserve of $3.7 billion and the conditional $5.5 billion ovarian-cancer settlement remain the largest swing factors for reported earnings and cash flow over that window.
Bull vs Bear
Bull Case
JNJ's TTM gross margin of 67.9%, TTM operating margin of 26.8% and TTM net margin of 21.5% demonstrate pricing power and cost discipline across a diversified Innovative Medicine and MedTech portfolio.
Return on equity of 25.7% and free cash flow of $7.67 per share on revenue of $40.64 per share show the business converts revenue into cash at a high rate, supporting the 70-year dividend growth record.
Revenue grew 6.6% year over year in the most recent quarter, indicating that the Innovative Medicine and MedTech franchises are still expanding despite the STELARA patent cliff.
The sell-side consensus is Buy with an average target of $320, implying 18.2% upside from $270.68, suggesting analysts see pipeline and MedTech contributions outpacing biosimilar headwinds.
Blended fair value of $286.05 implies 5.7% upside, and the shares are undervalued versus that blended estimate even though they look expensive against historical multiples.
Bear Case
STELARA revenue declined 55.2% to $740 million in the most recent reported quarter, and biosimilar competition reduced worldwide operational sales growth by approximately 4.6 percentage points, a drag that will persist as more immunology assets lose exclusivity.
The stock trades in a very expensive historical valuation regime at 31.4x trailing earnings, 6.66x sales, 35.31x free cash flow and 20.19x EV/EBITDA, leaving only 5.7% upside to the $286.05 fair value estimate.
Reported net earnings declined 0.1% year over year in the most recent quarter even as adjusted EPS rose 4.7%, showing that legal resolutions and accrual changes can create material GAAP earnings and cash-flow volatility.
Talc litigation remains a large unresolved overhang, with roughly 76,000 U.S. direct talc plaintiffs and a $3.7 billion present-value reserve as of June 28, 2026, and the proposed $5.5 billion ovarian-cancer settlement is conditional on at least 95% claimant participation.
Competitive pressure is broadening beyond Pfizer, Merck and AbbVie to biosimilar manufacturers, oncology innovators and surgical-robotics competitors, with SIMPONI biosimilars entering Europe in the most recent quarter adding pressure across mature immunology assets.
Leadership & Competitive Position
Joaquin Duato
Tenure5 yrs
Beats guidance75% of qtrs
Capital allocationGood
Joaquin Duato leads Johnson & Johnson as Chairman and Chief Executive Officer, having taken the top role after a long internal career spanning the pharmaceutical and consumer businesses. Under his leadership the company has continued to prioritize the Innovative Medicine and MedTech segments, maintained a 70-year streak of dividend increases, and managed large legal liabilities including the talc litigation reserve. The most recent quarter showed revenue growth of 6.6% year over year but a 0.1% decline in reported net earnings, reflecting the difficulty of offsetting STELARA biosimilar erosion and legal charges through the current portfolio.
Competitive Moat
narrowing
intangible assetsbrandswitching costs
JNJ competes at scale across Innovative Medicine and MedTech, with a diversified portfolio spanning immunology, oncology, neuroscience, infectious disease, cardiovascular and metabolism, pulmonary hypertension, interventional solutions, orthopaedics, surgery and vision. The moat is narrowing at the margin as STELARA revenue fell 55.2% to $740 million under biosimilar competition and SIMPONI biosimilars entered Europe in the most recent quarter, eroding exclusivity-based advantages in mature immunology.
Disruption: Medium. Biosimilar manufacturers are dismantling immunology exclusivity, oncology innovators are advancing competing therapies, and surgical-robotics competitors are challenging the MedTech franchise, though JNJ's scale and breadth provide meaningful insulation.
QuantHub Research
Valuation
Multiple
Current
Median 3yr
Median 5yr
Min 5yr
Max 5yr
P/E
31.4x
18.82x
21.63x
11.29x
25.86x
P/S
6.66x
4.66x
5.35x
3.88x
5.77x
P/FCF
35.31x
21.76x
22.82x
17.39x
26.87x
P/S 6.66x vs 5yr range 3.88-5.77x (P25=3.88x, median=5.35x, P75=5.73x)
Price Outlook (5-Year)
Bear
$229
-3.3%/yr
Base
$286
1.1%/yr
fair value
Bull
$343
4.8%/yr
Bear/Base/Bull anchored to QuantHub fair value estimate. Base = headline fair value; Bear −20%; Bull +20%.
STELARA revenue declined 55.2% to $740 million in the most recent reported quarter, and biosimilar competition reduced worldwide operational sales growth by approximately 4.6 percentage points, a drag that continues as additional immunology assets lose exclusivity.
Valuation risk
high
JNJ trades in a very expensive historical valuation regime at 31.4x trailing earnings, 6.66x sales, 35.31x free cash flow and 20.19x EV/EBITDA, versus only 5.7% upside to the $286.05 fair value estimate.
Talc litigation exposure
high
JNJ reported approximately 76,000 U.S. direct talc plaintiffs and a $3.7 billion present-value reserve as of June 28, 2026, and the proposed $5.5 billion ovarian-cancer settlement remains conditional on at least 95% claimant participation.
Earnings volatility
medium
Reported net earnings declined 0.1% year over year in the most recent quarter while adjusted EPS increased 4.7%, and legal resolutions and accrual changes can continue to cause material GAAP earnings and cash-flow variability.
Regulatory and pricing pressure
medium
FDA decisions, product safety, reimbursement, drug-price negotiations, tariffs and broader health-policy changes can pressure revenue and profitability, as highlighted by JNJ's January 2026 agreement to provide discounted medicines.
Competitive intensity
medium
Competition extends beyond Pfizer, Merck and AbbVie to biosimilar manufacturers, oncology innovators and surgical-robotics competitors, with SIMPONI biosimilars entering Europe in the most recent quarter adding pressure across mature immunology assets.
Growth Engines
Innovative Medicine oncology pipelinescaling
Oncology remains a large and growing global market where JNJ competes with targeted therapies and combinations, though specific pipeline revenue contributions are not disclosed in the available research.
MedTech surgical and interventionalmature
MedTech spans interventional solutions, orthopaedics, surgery and vision, a broad device market where JNJ holds scale advantages but faces surgical-robotics competition.
Cardiovascular and metabolismearly
Cardiovascular and metabolism is listed among Innovative Medicine focus areas, representing a long-duration opportunity, but no specific TAM or revenue figures are provided in the available research.
Neuroscience and pulmonary hypertensionscaling
Neuroscience and pulmonary hypertension are identified therapeutic areas within Innovative Medicine, contributing to portfolio diversification, though the research does not quantify their market size.
Bristol Myers Squibb and Johnson & Johnson Both Face Challenges Ahead
Coverage framed JNJ as offering massive scale and diversification across pharmaceutical medicine and advanced medical technology segments, while noting both companies face challenges, underscoring the debate over JNJ's premium multiple.
2026-09-23
2026 2H Healthcare Dividend Roundup: Johnson & Johnson Outshines AbbVie
JNJ trades at a roughly 30% P/E premium to AbbVie on an FY1 basis (24.2x versus 18.8x), a premium that is amplified on other metrics and highlights how much investors are paying for JNJ's quality and dividend record.
2026-09-24
Dividend growth framed as a way to clear a 6% hurdle rate
Commentary on dividend growth strategies referenced companies with long payout-increase records, a category in which JNJ's 70 consecutive years of dividend increases keeps it a core income holding despite a modest yield.
This is AI-powered fundamental analysis built from scratch — not aggregated analyst ratings. Get this research for your entire portfolio plus daily briefings, research signals, and options income.
QuantHub research is focused on quality businesses with durable competitive advantages — companies we'd want to own for 3–5 years or more. We are not short-term traders. Every analysis is built around a single question: is this a great business available at a reasonable price for a long-term investor?
We start where most analysts finish: the fundamentals. For every company, our AI ingests years of financial statements — revenue, margins, free cash flow, and how the business has been valued by the market across multiple cycles. But numbers alone don't tell you whether a business is worth owning.
The harder work is qualitative. We assess the competitive moat: is it widening or eroding? We read the leadership track record — how capital has been allocated, whether management has earned trust through consistent execution. We look at what the market is afraid of, and whether that fear is priced in fairly or irrationally.
Valuation is always relative. A stock is cheap or expensive compared to its own history. We build scenario matrices anchored to 5-year historical multiples, then ask: what has to go right for the upside case, and what's the floor if it doesn't?
Finally, we write an 18-month forward outlook — not a price target, but a mental model of where this business will be and what the narrative will look like. Every note is dated and versioned. When material facts change, we update the thesis.
Frequently Asked Questions
Is JNJ undervalued?
JNJ is currently fairly valued at $271.22 vs. our fair value estimate of $286.05 (+6% upside).
What is JNJ's fair value?
QuantHub Research estimates JNJ's fair value at $286.05 based on our proprietary valuation model incorporating historical P/S, P/E, and P/FCF multiples over a 5-year range.
What are the key risks for JNJ?
STELARA biosimilar erosion: STELARA revenue declined 55.2% to $740 million in the most recent reported quarter, and biosimilar competition reduced worldwide operational sales growth by approximately 4.6 percentage points, a drag that continues as additional immunology assets lose exclusivity. Valuation risk: JNJ trades in a very expensive historical valuation regime at 31.4x trailing earnings, 6.66x sales, 35.31x free cash flow and 20.19x EV/EBITDA, versus only 5.7% upside to the $286.05 fair value estimate. Talc litigation exposure: JNJ reported approximately 76,000 U.S. direct talc plaintiffs and a $3.7 billion present-value reserve as of June 28, 2026, and the proposed $5.5 billion ovarian-cancer settlement remains conditional on at least 95% claimant participation.
What is the bull case for JNJ?
JNJ's TTM gross margin of 67.9%, TTM operating margin of 26.8% and TTM net margin of 21.5% demonstrate pricing power and cost discipline across a diversified Innovative Medicine and MedTech portfolio. Return on equity of 25.7% and free cash flow of $7.67 per share on revenue of $40.64 per share show the business converts revenue into cash at a high rate, supporting the 70-year dividend growth record. Revenue grew 6.6% year over year in the most recent quarter, indicating that the Innovative Medi
How confident is QuantHub in JNJ?
QuantHub has moderate conviction in JNJ. Research last updated 2026-09-25.