I am neutral on Johnson & Johnson (NYSE:), as its stock price looks neither particularly attractive nor expensive at the moment.

Johnson and Johnson is one the most important healthcare companies in the world. It is known for its pharmaceutical and consumer products as well.

The Johnson & Johnson Company was established in 1886, by James, Robert and Edward Johnson. It employs more than 135,000 worldwide. (See Johnson & Johnson stock charts on TipRanks)

Johnson and Johnson’s strong product diversification and proven research and design team are key factors in Johnson and Johnson being a market leader. They also have a robust cash flow generator that works in harmony with their fortress balance sheet.

It holds significant intellectual property rights which allow it to build strong brands, loyalty customers and drive high capital returns over the course of cycles. It is also able to leverage its immense scale to improve efficiencies, and invest vast sums of resources into its R&D pipeline without eating significantly into its profit margins. It should be able to maintain its competitive edge for many years.

Johnson and Johnson has just reported its Q2 results. The overall financial results of Johnson and Johnson showed a remarkable year-over-year growth in sales of 27.7%, to $23.3 billion during the second quarter 2021. This was accompanied by an operating growth of 23% as well as an adjusted growth of 23.8%. The adjusted earnings per share (EPS) increased by 48.5% to $2.35 from $2.35.

Johnson and Johnson’s chairman and CEO stated that the company’s strong headline growth was driven by the impressive sales and earnings growth across its Medical Device, Consumer Health and Pharmaceutical businesses.

Consumer Health’s worldwide operating sales were up 10%, after excluding the net effects of divestitures or acquisitions. Worldwide pharmaceutical sales increased 14.1% due to STELARA, which is a drug that blocks the effects of divestitures and acquisitions.

Medical Device global operational sales grew by 58.7% (net impact not including acquisitions or divestitures). This was primarily due to the market recovery from COVID-19 and deferral of certain medical procedures during the previous year.

Value Metrics

Johnson and Johnson’s stock price looks fairly valued at the moment based on EV/EBITDA, which currently stands at 12.3x.

This ratio is close to its 5-year average of 16.82x.

Wall Street’s Take

Johnson and Johnson is rated Moderate Buy by Wall Street analysts based on five Buy ratings and two Hold ratings and no Sell ratings over the last three months.

The average Johnson & Johnson price target of $188.60 puts the upside potential at 18.2%.

Summary and conclusions

Johnson and Johnson’s stock is not particularly attractively priced, nor is it particularly expensive right now.

The company’s well-diversified healthcare business model and drug portfolio give it strong cash flow stability, and make it a great dividend growth stock.

Disclosure: Samuel Smith didn’t hold any position at the time this article was published.

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