Johnson & Johnson (JNJ) Overview Johnson & Johnson is a diversified healthcare conglomerate selling pharmaceuticals, medical devices and consumer products, and it displays a capital-efficient, high-margin financial profile with conservative leverage and substantial cash generation. Balance Sheet and Profitability Metrics The company’s balance sheet and profitability metrics are notable: debt-to-eq
Johnson & Johnson is a diversified healthcare conglomerate selling pharmaceuticals, medical devices and consumer products, and it displays a capital-efficient, high-margin financial profile with conservative leverage and substantial cash generation.
The company’s balance sheet and profitability metrics are notable: debt-to-equity is low at 0.2151 and interest coverage is a comfortable 27.17x, indicating ample capacity to service debt (Return on Equity (ROE)). Profitability is robust with trailing gross margin around 69.4%, operating margin near 27.7% and a net margin of 16.14%, reflecting durable pricing power and operating efficiency (Profit Margin Trends). Operating cash flow has trended up from $15.40B to $19.28B (TTM) and the historical cash conversion ratio exceeds 1.0 at 1.4186, supporting consistent conversion of earnings into cash (Strategic Capital Allocation; Earnings Quality Analysis).
There are areas of genuine concern on the growth and cash‑earnings alignment fronts. Split‑adjusted revenue per share peaked at $30.60 in late 2014 and eased to $28.84 most recently, and one‑year revenue‑per‑share growth is negative at −5.7% (period ending 2016‑01‑03), indicating slowing top‑line per‑share momentum (EPS Diluted & Revenue per Share; Revenue & EPS Growth). Also, the most recent net income observation of $26.80B exceeds the most recent operating cash flow of $19.28B by $7.52B, widening the gap between reported earnings and cash generation in the available records and meriting monitoring of earnings quality (Revenue & Net Income; Earnings Quality Analysis). Investing cash flow has been more negative recently (−$7.74B) while financing outflows remain sizable (−$10.85B), which affects free cash flow dynamics (Strategic Capital Allocation).
Key fundamental metrics to watch going forward are return on equity (32.9%), net profit margin (16.14%), revenue‑per‑share growth (−5.7%), the gap between net income and operating cash flow (NI $26.80B vs OCF $19.28B), investing cash flow trends (−$7.74B) and the trailing P/E which has risen to 18.8x (Return on Equity (ROE); Profit Margin Trends; EPS Diluted & Revenue per Share; Earnings Quality Analysis; Price-to-Earnings (PE) Ratio Trend).
The foundation of business quality and long-term value creation
JOHNSON & JOHNSON's net income in the most recent quarters shows a pronounced uptick: the period ending 2025-12-28 reports net income of $21.65B, up from $5.15B in the prior quarter ending 2025-09-28. Earlier historical net income entries in the dataset are generally in the $3–5B range across multiple quarters (for example, $4.27B on 2016-10-02, $4.00B on 2016-07-03, $4.73B on 2014-03-30), with an occasional larger figure such as $7.88B on 2012-12-30.
Revenue observations in the chart are older and less frequent; the most recent revenue record in this dataset is dated 2016-01-03 at $70.07B. Prior revenue entries show quarterly figures around $15–17B in the early 2010s (for example, $16.17B on 2011-04-03 and $17.57B on 2013-09-29) and an intermediate annual/aggregate value of $55.86B on 2014-12-28. The most recent Net Income was $21.65B. The most recent Revenue observation in the dataset was $70.07B.
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: Dec 2014 to Jan 2016
Analyzing long-term margin stability and competitive positioning
JOHNSON & JOHNSON's margins over the reported periods show high gross margins in the high-60% range and operating margins near the high-20% range. Gross margin was 69.5% at period end 2011, dipped to 67.8% at period end 2012, then returned to 69.4% by period end 2014. Operating margin followed a similar pattern with 27.5% in 2011, a notable trough at 20.5% in 2012, and recovery to 27.7% in 2014; the 2012 observation is the most pronounced inflection point in the available series. Net profit margin is reported only for the 2012 period at 16.1%.
Understanding Profit Margins
Between Dec 2014 and Jan 2016, Johnson Johnson 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
JOHNSON & JOHNSON’s trailing twelve-month net income in the dataset rises to $26.80B as of the period ending 2025-12-28, up from $10.85B reported for the 2012 TTM. Operating cash flow (TTM) values in the provided history increase more modestly, from $16.39B (2011) and $15.40B (2012) to $19.28B as of the period ending 2016-01-03. The most recent net income observation in the file exceeds the most recent operating cash flow observation by $7.52B.
Looking at inflection points, operating cash flow exceeded net income in the earlier 2012 data ($15.40B CF vs $10.85B NI), whereas the latest observations show net income above operating cash flow ($26.80B vs $19.28B), producing a larger gap in the most recent comparison within the available records. The most recent Net Income (TTM) was $26.80B (period ending 2025-12-28) and the most recent Operating Cash Flow (TTM) was $19.28B (period ending 2016-01-03).
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 & JOHNSON's reported trailing twelve-month Return on Equity shows an upward move between the two data points provided: 16.7% at period end 2012-12-30 and 32.9% at period end 2025-12-28. The chart therefore presents a clear increase in ROE over the interval, with the most recent observation roughly double the 2012 level.
The current ROE level is 32.9% as of 2025-12-28. The most recent trailing twelve-month ROE was 32.9%.
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 & JOHNSON's trailing twelve-month operating cash flow has trended upward in the data provided, rising from $15.40B (period ending 2012-12-30) to $18.47B (period ending 2014-12-28) and reaching $19.28B in the most recent period (2016-01-03). Investing cash flow moved from a smaller outflow of \$-4.51B in 2012 to a larger outflow of \$-12.30B by the 2014 snapshot, then improved to a \$-7.74B outflow in the latest period, showing a partial reversal versus 2014 but remaining more negative than 2012.
Financing cash flow shows sizable net outflows throughout the series, with a peak outflow of \$-20.56B in 2012 that narrowed to \$-12.26B in 2014 and to \$-10.85B in the most recent 2016 period. The most recent trailing twelve-month values are: operating cash flow $19.28B, investing cash flow $-7.74B, and financing cash flow $-10.85B.
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 & JOHNSON's trailing twelve-month price-to-earnings ratio increased from 15.7x at the 2012-12-30 period end to 18.8x at the 2025-12-28 period end, indicating a modest rise in the multiple over the interval covered by the data. The series shows a single upward move between the two reported dates, so no intermediate inflection points are provided in the dataset.
Most recent P/E ratio: 18.8x
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.