Johnson Controls International plc exhibits a conservative financial profile with strong cash-generation capabilities, supported by recent improvements in earnings and cash flow metrics, but faces some profitability and leverage challenges to monitor. Company Overview Johnson Controls International plc is a global building-products and controls company that combines manufacturing and services with
Johnson Controls International plc exhibits a conservative financial profile with strong cash-generation capabilities, supported by recent improvements in earnings and cash flow metrics, but faces some profitability and leverage challenges to monitor.
Johnson Controls International plc is a global building-products and controls company that combines manufacturing and services with a generally conservative financial profile and meaningful cash-generation focus.
Trailing operating cash flow versus net income (current OCF TTM $2.98B vs Net Income TTM $2.22B) and the cash conversion ratio of 1.2012 will indicate whether earnings remain cash-backed.
Profit margins (gross at 31.0% and net at 5.3%) and quarterly net income volatility.
Leverage and return metrics: debt/equity 0.6372 and ROE 7.3%, alongside the PE multiple near 11.0x to track market expectations versus operating performance [Earnings Quality Analysis], [Profit Margin Trends], [Return on Equity (ROE)], and [Price-to-Earnings (PE) Ratio Trend].
The foundation of business quality and long-term value creation
Johnson Controls International plc's reported net income shows notable quarter-to-quarter variability in the most recent year. After a peak of $1.72B in the quarter ended 2023-09-30, net income declined to $374.0M for 2023-12-31 and then to $133.0M for 2024-03-31, before rising to $975.0M in the quarter ended 2024-06-30. These recent quarters indicate a recovery in the latest period versus the first quarter of 2024, though the 2023-09-30 level remains the largest recent inflection point.
Revenue observations in the provided dataset are sparse and older compared with the net income series. The most recent revenue entry in this chart is for the period ended 2017-09-30 at $30.17B, with earlier revenue points scattered across prior years (for example, $2.45B on 2016-06-24 and $10.34B on 2014-09-26). The most recent quarterly net income was $975.0M. The most recent reported revenue in the dataset was $30.17B.
Why Growth Matters
Consistent revenue and earnings growth are the lifeblood of successful long-term investments. Companies that can grow their top line (revenue) and bottom line (net income) over many years demonstrate they have products or services customers value and are willing to pay for repeatedly.
Revenue Growth shows whether the company is expanding its market reach, gaining market share, or successfully launching new products.Net Income Growth demonstrates the company can convert that revenue into actual profits while managing costs effectively.
Look for steady, sustainable growth rather than erratic spikes. The best businesses compound earnings year after year, creating tremendous value for shareholders over time. Companies that can grow earnings faster than revenue are improving their profitability—a sign of operational excellence and competitive strength.
Year-over-year growth rates for revenue and earnings per share
Reading the Growth Rate Chart
This chart converts the absolute per-share figures into year-over-year percentage changes, making it easy to see whether growth is accelerating, decelerating, or reverting to trend — regardless of the company's absolute size.
Revenue per Share Growth (1-year, split-adjusted) measures how quickly the top line is expanding on a per-share basis. Sustained positive growth signals that the company continues to win customers and grow its addressable market.EPS Diluted Growth (1-year, split-adjusted) measures how quickly earnings are compounding for each shareholder. When EPS growth consistently outpaces revenue growth, operating leverage and margin expansion are at work.
Look for consistency, not just magnitude. A company that reliably grows EPS 10–15% per year is far more valuable than one that alternates between 50% spikes and deep contractions. Negative EPS growth during a period of positive revenue growth is a red flag — costs are rising faster than sales. Quarters where both lines converge near zero or go negative deserve close scrutiny.
How revenue converts to net income for the most recent annual period
Period Information
Report Type: Annual (10-K)
Period: Oct 2016 to Sep 2017
Analyzing long-term margin stability and competitive positioning
In the most recent quarter reported (period ended 2017-09-30), Johnson Controls International plc shows a gross margin of 31.0% and a net profit margin of 5.3%. These recent values sit below the 2014 peaks (gross 39.8%, net 17.8%) but well above the 2013 troughs (gross 4.9%, net 5.0%), indicating a substantial improvement from 2013 with some reversal from the 2014 highs.
The most notable inflection between 2013 and 2014 is a large upward shift in all margins.
Moved from a negative -22.6% in the 2013 period to a positive 10.4% in 2014; no operating margin is reported for 2017 in the dataset, so the latest observed operating margin remains the 10.4% from 2014.
Understanding Profit Margins
Between Oct 2016 and Sep 2017, Johnson Controls International Plc converts every dollar of revenue through the following stages:
Sustainable competitive advantages reveal themselves through consistently superior profit margins over extended periods. Companies with durable economic moats maintain pricing power and operational efficiency that competitors struggle to match.
A sign of durable competitive advantage is earning sustained higher margins than competitors.Look for margins that remain stable or improve over time, especially during economic downturns. Declining margins may signal increasing competition, pricing pressure, or deteriorating business fundamentals.
Comparing reported earnings to actual cash generation
Over the most recent TTM observations, Johnson Controls International plc's operating cash flow has trended upward: operating CF TTM rose from $1.57B at period-end 2024-09-30 to $2.55B at 2025-09-30, then to $2.92B at 2025-12-31 and $2.98B at 2026-03-31. Net income TTM in the most recent available quarters increased from $1.85B at 2023-09-30 to $2.22B at 2023-12-31. As of the latest points in the dataset, operating cash flow exceeds the most recently reported net income TTM.
Earlier periods show notable inflection points and divergences: net income spiked to $5.67B at 2019-09-30 while operating cash flow at the same time was $1.74B, and net income was negative $868.0M at 2016-09-30 while operating cash flow was roughly $1.90B. The most recent Operating Cash Flow (TTM) was $2.98B. The most recent Net Income (TTM) was $2.22B.
The Earnings vs. Cash Flow Gap
Reported earnings (Net Income) doesn't always reflect actual cash generation. Companies use accrual accounting, which recognizes revenue when earned and expenses when incurred—not when cash actually changes hands. This creates timing differences and opportunities for accounting discretion that can mask underlying business health.
Net Income (the "earnings" number) can be influenced by non-cash items like depreciation, stock-based compensation, and changes in accounting estimates.Operating Cash Flow, however, shows the actual cash the business generates from its core operations—a harder number to manipulate.
What to Look For
Key Insight: Companies with durable competitive advantages typically show operating cash flow that meets or exceeds net income over time, demonstrating they convert accounting profits into actual cash that can be returned to shareholders or reinvested in the business.
Measuring management's efficiency at generating profits from shareholder capital
Johnson Controls International plc's trailing twelve-month return on equity declined in the most recent quarter, falling from 11.2% on to 7.3% on . This drop between the two latest quarters is the most pronounced movement in the provided series and represents the current downward change in ROE.
The most recent ROE () was 7.3%.
The Gold Standard of Profitability
Return on Equity (ROE) is a powerful measure of how effectively a company's management is using the money shareholders have invested. Calculated by dividing Net Income by Shareholders' Equity, it reveals how much profit is generated for every dollar of equity capital.
A consistently high ROE (typically above 15-20%) is often the signature of a "quality" business with a durable competitive advantage. It indicates that the company can generate high returns on its own capital, which it can then reinvest at these high rates to compound value over time.
What to Look For:
How the company generates and deploys its cash
Johnson Controls International plc's trailing twelve-month operating cash flow has trended upward over the most recent year. After rising from $2.55B at 2025-09-30 to $2.92B at 2025-12-31, it reached $2.98B at 2026-03-31. A notable inflection occurred at 2024-09-30 when operating cash flow dipped to $1.57B from prior levels around $2.22B, followed by a sustained recovery through 2025 and into early 2026.
The dataset includes less-recent trailing twelve-month investing and financing cash flow observations; the latest available investing cash flow in the table is -$258.0M (period ending 2020-09-30) and the latest available financing cash flow is -$2.82B (period ending 2020-09-30).
Understanding Company Strategy
Capital allocation refers to how management decides to spend and invest the company's cash. Analyzing the three primary categories of cash flow reveals a company's true operational strategy:
What to look for: Is the company bootstrapping (funding growth solely from operating cash)? Are they borrowing to fund aggressive expansion or dividends? Or are they capital raising by issuing new shares, potentially diluting your ownership? A healthy, mature company typically generates strong operating cash, moderately invests in growth, and returns the surplus to shareholders through financing activities.
Net assets attributable to each share — the accounting floor of intrinsic value
Why Book Value per Share Matters
Book value per share is the net worth of the company — total assets minus total liabilities — divided by shares outstanding (split-adjusted). It represents the theoretical liquidation value per share if every asset were sold and every liability repaid at balance-sheet carrying values. It is the accounting foundation upon which much of equity valuation is built.
A steadily rising book value per share is one of the most reliable signals of compounding wealth creation. It means the company is retaining earnings and building net worth faster than it is returning capital or eroding it. Warren Buffett famously tracked Berkshire Hathaway's book value per share for decades as his primary measure of intrinsic value growth.
Context is essential. Asset-heavy businesses (banks, manufacturers, utilities) should be judged by book value more directly than asset-light businesses (software, consumer brands), where intangible assets like intellectual property and customer loyalty may far exceed their balance-sheet carrying values. A company trading at a large premium to book value is not necessarily overvalued — it may simply possess competitive advantages that accounting rules do not capture. Conversely, a declining book value per share — especially over multiple years — is a serious warning sign of capital destruction.
How much of the company is financed by debt versus shareholders' equity
Reading the Debt-to-Equity Ratio
The debt-to-equity (D/E) ratio compares total financial debt to shareholders' equity. A ratio of 1.0 means the company has borrowed one dollar for every dollar of equity; a ratio of 2.0 means it has borrowed twice as much as it owns. Financial leverage amplifies both returns and risk: in good times, debt turbocharges equity returns; in bad times, it accelerates losses and can threaten solvency.
Trends matter more than a single number. A rising D/E ratio can mean the company is taking on debt to fund growth — potentially value-creating if returns exceed the cost of capital. But it can also mean equity is being eroded through losses or that the business is borrowing simply to sustain operations. A falling D/E ratio generally reflects strengthening financial health: earnings are being retained, debt maturities are being paid down, or both.
Industry norms vary enormously. Capital-intensive sectors (utilities, real estate, financials) routinely carry high D/E ratios that would be alarming in, say, a technology company. Always compare against sector peers. As a rough rule of thumb, a D/E above 2× in a cyclical business warrants careful scrutiny of interest coverage and refinancing risk.
Short-term liquidity — can the company cover its near-term obligations?
Liquidity: Can the Business Pay Its Bills?
The current ratio is calculated as current assets divided by current liabilities. A ratio of 1.5 means the company has $1.50 of short-term assets — cash, receivables, inventory — for every $1.00 of obligations due within the next twelve months. It is the most direct measure of near-term financial resilience: can the business meet its obligations without needing to raise new capital or sell long-term assets at a discount?
A ratio above 1.0 is generally healthy, meaning current assets exceed current liabilities. A ratio consistently above 2.0 may indicate the company is holding excess cash or inventory that could be deployed more productively. A ratio below 1.0 is a warning sign — the company is relying on future cash generation or external financing to cover its near-term obligations, which is manageable in normal conditions but dangerous during a downturn.
Trends and context matter.A declining current ratio isn't always alarming — highly efficient businesses (e.g., large retailers with reliable daily cash flows) often run leaner balance sheets intentionally. Conversely, a rapidly rising current ratio can signal slowing sales causing inventory to build, or customers taking longer to pay. Always compare the trend against industry peers and cross-reference with the cash flow statement to assess whether the business is genuinely liquid or just holding non-cash current assets.
How much the market is paying for each dollar of company earnings
Johnson Controls International plc’s trailing twelve-month Price-to-Earnings ratio declined modestly in the most recent quarter, moving from 12.1x on to 11.0x on , a contraction of 1.1x quarter-over-quarter. The most recent movement represents a slightly lower valuation multiple compared with the prior quarter.
Across the longer history provided, the PE ratio has been volatile: notable peaks occurred at 29.2x () and 28.0x (), followed by a multi-year fall to a trough of 3.3x on and a recovery into the low double digits by 2023. The most recent reported Price-to-Earnings (PE) ratio for Johnson Controls International plc was 11.0x.
What Is the PE Ratio?
The Price-to-Earnings (PE) ratio is one of the most widely used valuation metrics in investing. It divides the current stock price by the company's earnings per share (EPS), revealing how much investors are willing to pay for each dollar of earnings. A high PE can signal that the market expects strong future growth, while a low PE may suggest undervaluation—or reflect genuine concerns about the company's prospects.
Context matters:PE ratios vary significantly across industries. High-growth technology companies routinely trade at PE ratios above 30x or 40x, while mature, low-growth sectors like utilities or financials often trade closer to 10–15x. Always compare a company's PE to its own history and its industry peers, not just an absolute number.
What to Look For:
Key Insight:The PE ratio is a snapshot of market sentiment and expectations. Tracking it over time alongside earnings trends reveals whether the market's valuation has expanded or contracted—and whether that change is justified by fundamentals.