Johnson & Johnson Jnj Stock-sample Analysis Report Intrinsic Value

Jae Jun Author

mail questions or comments to: [email protected] www.oldschoolvalue.com

Disclaimer Nothing on Old School Value, related pages, emails, or other communications by the author, either written or oral, are intended to be a recommendation to either buy, hold, or sell any specific security or group of securities. Likewise, nothing herein should be construed as an endorsement of any financial adviser, investment manager, commercial information provider, transaction service, or brokerage firm. The findings from this spreadsheet is merely a start to a means of further research and uncovering a great business and investment. Old School Value holds no responsibility for any investment whatsoever.

Company Name

ticker

JOHNSON & JOHNSON

JNJ

2/18/2009

all figures in $Mil

Financial Data

JNJ

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

TTM

Revenue

$ 23,657.0

$ 27,471.0

$ 29,139.0

$ 33,004.0

$ 36,298.0

$ 41,862.0

$ 47,348.0

$ 50,514.0

$ 53,324.0

$ 61,095.0

$ 64,522.0

COGS COGS (%)

$

$

$

$

$ 10,447.0 28.8%

$ 12,176.0 29.1%

$ 13,422.0 28.3%

$ 13,954.0 27.6%

$ 15,057.0 28.2%

$ 17,751.0 29.1%

$ 18,873.0 29.3%

Gross Profit

$ 16,161.0

$ 25,851.0

$ 29,686.0

$ 33,926.0

$ 36,560.0

$ 38,267.0

$ 43,344.0

$ 45,649.0

Income Statement 7,496.0 31.7%

Gross Profit (%)

8,442.0 30.7%

$ 19,029.0

8,861.0 30.4%

$ 20,278.0

9,536.0 28.9%

$ 23,468.0

68.3%

69.3%

69.6%

71.1%

71.2%

70.9%

71.7%

72.4%

71.8%

70.9%

70.7%

$ 14,131.0 33.8%

$ 15,860.0 33.5%

$ 16,877.0 33.4%

$ 17,433.0 32.7%

$ 20,451.0 33.5%

$ 21,546.0 33.4%

Operating Expenses SG&A SG&A (%) R&D R&D (%)

$

8,907.0 37.7%

$ 10,503.0 38.2%

$ 10,875.0 37.3%

$ 11,992.0 36.3%

$ 12,216.0 33.7%

$

$

2,980.0 10.2% 34.0 0.1%

$

3,696.0 11.2% 185.0 0.6%

$

$

2,600.0 9.5% 222.0 0.8%

$

Other Other (%)

2,433.0 10.3% 704.0 3.0%

Operating Income

$

4,117.0

$

5,704.0

$

6,389.0

$

7,595.0

$

Operating Income (%)

$

17.4%

$

20.8%

$

21.9%

$

23.0%

4,146.0 $ 11.4% 294.0 $ 0.8% 9,195.0

5,602.0 $ 13.4% (385.0) $ -0.9%

$ 10,338.0

25.3%

5,221.0 $ 11.0% 15.0 $ 0.0%

$ 12,830.0

24.7%

6,674.0 $ 13.2% (214.0) $ -0.4%

$ 13,223.0

27.1%

7,684.0 $ 14.4% (671.0) $ -1.3%

$ 13,821.0

26.2%

8,487.0 13.9% 1,279.0 2.1%

$ 13,127.0

25.9%

$ $

7,837.0 12.1% 534.0 0.8%

$ 15,732.0

21.5%

24.4%

Other Income and Expense Net Int Inc & Other

$

152.0

$

49.0

$

233.0

$

303.0

$

96.0

Earnings Before Taxes

$

4,269.0

$

5,753.0

$

6,622.0

$

7,898.0

$

9,291.0

$

(30.0) $

$ 10,308.0

8.0

$ 12,838.0

$

433.0

$ 13,656.0

Income Taxes

$

1,210.0

$

1,586.0

$

1,822.0

$

2,230.0

$

2,694.0

$

3,111.0

$

4,329.0

$

Earnings After Taxes Acctg Changes

$ $ $

3,059.0 -

$ $ $

4,167.0 -

$ $ $

4,800.0 -

$ $ $

5,668.0 -

$ $ $

6,597.0 -

$ $ $

7,197.0 -

$ $ $

8,509.0 -

$ 10,411.0 $ $ -

Disc Operations Ext Items Net Income

$ $

Net Income (%) Diluted EPS, Cont Ops$ Diluted EPS$

-

$

3,059.0

$

12.9% $ $

-

Shares

4,167.0

$ $

15.2% $ $

0

4,800.0

$ $

16.5%

1.5 $ 1.5 $ 2834

5,668.0

$ $

17.2%

1.7 $ 1.7 $ 2823

6,597.0

$ $

18.2%

1.8 $ 1.8 $ 3080

7,197.0

$ $

17.2%

2.2 $ 2.2 $ 3054

8,509.0

$

-

$ 10,411.0

18.0%

2.4 $ 2.4 $ 2998

3,245.0

$ $

3,534.0

$ 11,053.0 $ $ $

-

$ 11,053.0

20.6%

2.8 $ 2.8 $ 2996

766.0

$ 14,587.0

$ $

2,707.0

$ 10,576.0 $ $ $

-

$ 10,576.0

20.7%

3.5 $ 3.5 $ 3008

156.0

$ 13,283.0

$ $

3,135.0

$ 12,609.0 $ $ $

-

$ 12,609.0

17.3%

3.7 $ 3.7 $ 2963

300.0

$ 15,744.0

19.5%

3.6 $ 3.6 $ 2913

4.4 4.4 2859

Balance Sheet Assets Cash and Equiv Short-Term Investments Accts Rec Inventory Other Current Assets Total Current Assets

$ $ $

1,927.0 3,661.0

$ $ $

2,363.0 4,233.0

$ $ $

3,411.0 4,464.0

$ $ $

3,758.0 4,630.0

$ $ $

2,894.0 5,399.0

$ $ $

5,377.0 6,574.0

$ $ $

9,203.0 6,831.0

$ 16,055.0 $ $ 7,010.0

$ $ $

4,083.0 8,712.0

$ $ $

7,770.0 9,444.0

$ 14,018.0 $ $ 10,156.0

$ $

2,853.0 2,691.0

$ $

3,095.0 3,509.0

$ $

2,842.0 4,733.0

$ $

2,992.0 7,093.0

$ $

3,303.0 7,670.0

$ $

3,588.0 7,456.0

$ $

3,744.0 7,542.0

$ $

$ $

4,889.0 5,291.0

$ $

5,110.0 7,621.0

$ $

3,959.0 4,370.0

5,473.0 6,943.0

Net PP&E

$ 11,132.0 $ 6,240.0

$ 13,200.0 $ 6,719.0

$ 15,450.0 $ 6,971.0

$ 18,473.0 $ 7,719.0

$ 19,266.0 $ 8,710.0

$ 22,995.0 $ 9,846.0

$ 27,320.0 $ 10,436.0

$ 31,394.0 $ 10,830.0

$ 22,975.0 $ 13,044.0

$ 29,945.0 $ 14,185.0

$ 36,590.0 $ 14,355.0

Intangibles Other Long-Term Assets

$ $

$ $

$ $

$ $

$ $

9,246.0 3,334.0

$ 11,539.0 $ 3,883.0

$ 11,842.0 $ 3,719.0

$ 12,175.0 $ 3,626.0

$ 28,688.0 $ 5,849.0

$ 28,763.0 $ 8,061.0

$ 28,571.0 $ 8,208.0

Total Assets

$ 26,211.0

7,209.0 1,630.0

7,571.0 1,673.0

$ 29,163.0

7,256.0 1,644.0

9,077.0 3,219.0

$ 31,321.0

$ 38,488.0

$ 40,556.0

$ 48,263.0

$ 53,317.0

$ 58,025.0

$ 70,556.0

$ 80,954.0

$ 87,724.0

Liabilities & Stockholders' Equity Accts Payable Short-Term Debt Taxes Payable Accrued Liabilities

$ $ $

1,861.0 2,747.0 206.0

$ $ $

2,003.0 1,806.0 206.0

$ $ $

2,083.0 1,479.0 314.0

$ $ $

2,838.0 565.0 537.0

$ $ $

3,621.0 2,117.0 710.0

$ $ $

4,966.0 1,139.0 944.0

$ $ $

5,227.0 280.0 1,506.0

$ $ $

4,315.0 668.0 940.0

$ $ $

5,691.0 4,579.0 724.0

$ $ $

6,909.0 2,463.0 223.0

$ $ $

6,384.0 6,245.0 458.0

$

3,348.0

$

3,439.0

$

3,264.0

$

4,104.0

$

5,001.0

$

6,399.0

$

6,914.0

$

6,712.0

$

8,167.0

$ 10,242.0

$

9,643.0

$

$

Other Short-Term Liabilities

$

Total Current Liabilities Long-Term Debt

$ $

8,162.0 1,269.0

$ $

7,454.0 2,450.0

$ $

7,140.0 2,037.0

$ $

8,044.0 2,217.0

$ 11,449.0 $ 2,022.0

$ 13,448.0 $ 2,955.0

$ 13,927.0 $ 2,565.0

$ 12,635.0 $ 2,017.0

$ 19,161.0 $ 2,014.0

$ 19,837.0 $ 7,074.0

$ 22,730.0 $ 8,395.0

Other Long-Term Liabilities

$

3,190.0

$

3,046.0

$

3,336.0

$

3,994.0

$

$

$

$

5,502.0

$ 10,063.0

$ 10,724.0

$ 10,865.0

Total Liabilities

$ 12,621.0

$ 12,950.0

$ 12,513.0

$ 14,255.0

$ 17,859.0

$ 21,394.0

$ 21,504.0

$ 20,154.0

$ 31,238.0

$ 37,635.0

$ 41,990.0

Total Equity

$ 13,590.0

$ 16,213.0

$ 18,808.0

$ 24,233.0

$ 22,697.0

$ 26,869.0

$ 31,813.0

$ 37,871.0

$ 39,318.0

$ 43,319.0

$ 45,734.0

Total Liabilities & Equity

$ 26,211.0

$ 29,163.0

$ 31,321.0

$ 38,488.0

$ 40,556.0

$ 48,263.0

$ 53,317.0

$ 58,025.0

$ 70,556.0

$ 80,954.0

$ 87,724.0

-

$

-

$

-

$

-

$

-

4,388.0

$

-

4,991.0

$

-

5,012.0

$

-

$

-

-

-

Cash Flows Statement Cash Flows From Operating Activities Net Income

$

3,059.0

Depr & Amort Deferred Taxes

$ $

1,246.0 $ (239.0) $

Other

$

820.0

$

73.0

$

415.0

$

1,697.0

$

Cash from Operations

$

4,886.0

$

5,677.0

$

6,563.0

$

8,864.0

$

$

4,167.0

$

1,444.0 $ (7.0) $

4,800.0

$

1,515.0 $ (167.0) $

5,668.0

$

1,605.0 $ (106.0) $

6,597.0

$

1,662.0 $ (74.0) $ (9.0) $ 8,176.0

7,197.0

$

1,869.0 $ (720.0) $ 2,249.0

$ 10,595.0

$

8,509.0

$ 10,411.0

2,124.0 $ (498.0) $ 996.0

$ 11,131.0

$

$ 11,053.0

2,093.0 $ (46.0) $ (581.0) $

$ 11,877.0

$ 10,576.0

2,177.0 $ (1,168.0) $ 2,186.0

$ 14,248.0

$

$ 12,609.0

2,777.0 $ (1,762.0) $ 3,658.0

$ 15,249.0

$

2,992.0 (1,216.0) 910.0

$ 15,295.0

Cash Flows From Investing Activities Cap Ex Purchase of Business

$ $

(1,460.0) $ (3,481.0) $

(1,728.0) $ (271.0) $

(1,646.0) $ (68.0) $

Other

$

(698.0) $

(943.0) $

(654.0) $

Cash from Investing

$ (5,639.0) $ (2,942.0) $ (2,368.0) $ (4,093.0) $ (2,197.0) $ (4,526.0) $ (2,347.0) $

(1,731.0) $ (225.0) $ (2,137.0)

$

(2,099.0) $ (478.0) $ 380.0

$

(2,262.0) $ (2,812.0) $ 548.0

$

(2,175.0) $ (580.0) $ 408.0

$

(2,632.0) $ (2,666.0) $ (987.0) $ (18,023.0) $ 3,340.0

$

398.0

$

(2,942.0) $ (1,388.0) $ (1,809.0)

$

(3,176.0) (410.0) 512.0

(279.0) $ (20,291.0) $ (6,139.0) $ (3,074.0)

Cash Flows From Financing Activities Net Issuance of Stock Net Issuance of Debt Dividends Other Cash from Financing Currency Adj Change in Cash

$ $ $ $ $ $ $

(661.0) $ (577.0) $ 2,510.0 $ 10,654.0 $ (1,305.0) $ (1,479.0) $ (642.0) $ (10,892.0) $

(681.0) $ 818.0 $ (1,724.0) $ (1,513.0) $

(2,056.0) 352.0 (2,047.0) (1,500.0)

$ $ $ $

(6,148.0) 2,381.0 (2,381.0) (805.0)

$ $ $ $

(872.0) $ 4,085.0 $ (2,746.0) $ (4,330.0) $

(742.0) 531.0 (3,251.0) (1,686.0)

$ $ $ $

(1,021.0) 1,221.0 (3,793.0) (928.0)

$ $ $ $

(5,587.0) $ (4,045.0) 6,391.0 $ 24,726.0 (4,267.0) $ (4,670.0) (2,646.0) $ (21,709.0)

$ $ $ $

(7,237.0) 8,831.0 (4,934.0) (1,502.0)

(98.0) $ (2,294.0) $ (3,100.0) $ (5,251.0) $ (6,953.0) $ (3,863.0) $ (5,148.0) $ (4,521.0) $ (6,109.0) $ (5,698.0) $ (4,842.0) $ (826.0) $

369.0

$ $

5,677.0

$

1,048.0

$ $

6,563.0

$

$ (520.0) $

$ (864.0) $

2,483.0

$ $

3,826.0

$ $

6,852.0

$ $ $ (11,972.0) $

3,687.0

$ $

7,378.0

Free Cash Flow Cash from Operations

$

Cap Ex

$

(1,460.0) $

(1,728.0) $

(1,646.0) $

(1,731.0) $

(2,099.0) $

(2,262.0) $

(2,175.0) $

(2,632.0) $

Free Cash Flow Book Value Per Share

$

2,845.0

$

3,883.0

$

4,669.0

$

5,542.0

$

5,994.0

$

6,804.0

$

8,458.0

$

8,618.0

#DIV/0! $

5.72

$

6.66

$

7.87

$

7.43

$

8.96

$

10.62

$

12.59

4,886.0

$

8,864.0

$

8,176.0

$ 10,595.0

$ 11,131.0

$ 11,877.0

$ 14,248.0

$ 15,249.0

(2,666.0) $

$ 15,295.0

(2,942.0) $

(3,176.0)

$ 10,564.0

$ 10,411.0

$ 11,813.0

$

$

$

13.27

14.87

16.00

Company Name

ticker

JOHNSON & JOHNSON

JNJ

2/18/2009

User Input Params

User Growth

all figures in $Mil

Desired MOS 50%

12.00% Growth 12.0%

Discount % 9.0%

1998

1999

2000

$

Price 55.83 2001

Share Value Buy under Actual D/C % $ 71.67 $ 35.84 22% Financial Data 2002 2003 2004

52Wk High $72.76

52Wk Low $52.06

2005

2006

2007

Income Sheet Data Revenue Gross Profit Operating Income Net Income Diluted EPS

$ $ $ $ $

23,657.0 16,161.0 4,117.0 3,059.0 -

$ $ $ $ $

27,471.0 19,029.0 5,704.0 4,167.0 1.5

$ $ $ $ $

29,139.0 20,278.0 6,389.0 4,800.0 1.7

$ $

4,886.0 2,845.0

$ $

5,677.0 3,883.0

$ $

6,563.0 4,669.0

$ $ $ $

11,132.0 8,162.0 12,621.0 6,381.0

$ $ $ $

13,200.0 7,454.0 12,950.0 8,642.0

$ $ $ $

15,450.0 7,140.0 12,513.0 11,552.0

$ 33,004.0 $ 23,468.0 $ 7,595.0 $ 5,668.0 $ 1.8

$ 36,298.0 $ 25,851.0 $ 9,195.0 $ 6,597.0 $ 2.2

$ $ $ $ $

41,862.0 29,686.0 10,338.0 7,197.0 2.4

$ 47,348.0 $ 33,926.0 $ 12,830.0 $ 8,509.0 $ 2.8

$ $ $ $ $

50,514.0 36,560.0 13,223.0 10,411.0 3.5

$ $ $ $ $

53,324.0 38,267.0 13,821.0 11,053.0 3.7

$ $ $ $ $

61,095.0 43,344.0 13,127.0 10,576.0 3.6

$ $

8,864.0 5,542.0

$ $

8,176.0 5,994.0

$ $

10,595.0 6,804.0

$ 11,131.0 $ 8,458.0

$ 11,877.0 $ 8,618.0

$ 14,248.0 $ 10,564.0

$ 15,249.0 $ 10,411.0

$ 18,473.0 $ 8,044.0 $ 14,255.0 $ 15,156.0

$ $ $ $

19,266.0 11,449.0 17,859.0 13,451.0

$ $ $ $

22,995.0 13,448.0 21,394.0 15,330.0

$ $ $ $

$ $ $ $

$ $ $ $

$ $ $ $

Cash Flow Data Cash from Operations Free Cash Flow

Balance Sheet Data Current Assets Current Liabilities Total Liabilities Tangible Shareholder Equity

27,320.0 13,927.0 21,504.0 19,971.0

31,394.0 12,635.0 20,154.0 25,696.0

22,975.0 19,161.0 31,238.0 10,630.0

29,945.0 19,837.0 37,635.0 14,556.0

Margins Gross Margin Operating Margin Net Margin Current Assets>1.5 times

68.3% 17.4% 12.9% 136.4%

69.3% 20.8% 15.2% 177.1%

69.6% 21.9% 16.5% 216.4%

71.1% 23.0% 17.2% 229.6%

71.2% 25.3% 18.2% 168.3%

70.9% 24.7% 17.2% 171.0%

71.7% 27.1% 18.0% 196.2%

72.4% 26.2% 20.6% 248.5%

71.8% 25.9% 20.7% 119.9%

70.9% 21.5% 17.3% 151.0%

26.2% 12.0% 262.7% 0.0% 0.0%

27.5% 14.1% 272.8% 15.1% 28.0%

27.6% 16.0% 311.8% 15.9% 27.4%

25.9% 16.8% 318.7% 16.2% 26.3%

30.2% 16.5% 316.3% 16.7% 28.1%

29.2% 16.3% 339.4% 16.2% 29.0%

30.7% 17.9% 358.5% 16.8% 29.0%

25.9% 17.1% 352.5% 18.7% 29.9%

46.5% 19.8% 308.0% 17.2% 28.6%

32.2% 17.0% 347.4% 14.0% 25.6%

92.9% 8.5% 22.5%

79.9% 13.1% 30.0%

66.5% 9.8% 37.3%

58.8% 8.4% 38.9%

78.7% 8.2% 33.6%

79.6% 9.9% 31.8%

67.6% 7.5% 39.3%

53.2% 5.1% 42.8%

79.4% 4.9% 33.8%

86.9% 14.0% 27.7%

1998-2005 22.0% 17.2% 27.5% 16.4% 16.2% 28.0% 11.4% 71.0% 23.9% 17.2% 0.0% 13.5%

1999-2006 3.0% 15.4% 28.4% 16.7% 16.5% 28.4% 9.9% 71.2% 25.0% 17.6% 14.2% 14.0%

2000-2007 3.4% 12.1% 29.7% 16.9% 16.5% 28.4% 11.2% 71.2% 25.0% 17.6% 11.4% 12.8%

2000-2005 17.3% 13.0% 28.4% 16.7% 16.5% 28.6% 11.6% 71.2% 25.0% 17.6% 15.3% 12.6%

2001-2006 -6.8% 13.8% 29.7% 16.9% 16.7% 28.8% 10.1% 71.4% 25.6% 18.1% 15.2% 10.0%

2002-2007 1.6% 11.7% 30.4% 17.1% 16.7% 28.8% 11.0% 71.4% 25.6% 18.1% 10.9% 13.3%

Efficiency & Profitability CROIC FCF/Sales Inventory Turnover Return On Assets (ROA) Retun On Equity (ROE)

Debt Related Debt to Equity Capitalization Ratio FCF to Debt

Multi-Year Performance Shareholder Equity Free Cash Flow CROIC FCF/Sales ROA ROE Revenue Growth Gross Margin Operating Margin Net Margin Earnings Growth Cash from Ops Growth

1998-2003 19.2% 19.1% 27.5% 16.1% 16.0% 27.7% 12.1% 70.3% 22.5% 16.8% 0.0% 16.7%

1999-2004 18.2% 16.8% 28.4% 16.4% 16.2% 28.0% 11.5% 71.0% 23.9% 17.2% 14.1% 14.4%

Median 10.3% 14.6% 28.4% 16.7% 16.5% 28.4% 11.3% 71.2% 25.0% 17.6% 12.8% 13.4%

Projection of future Free Cash Flow Growing at 12.0%

$

Growing at 3%

$

2008 11,660 2018 27,114

2009 13,060 2019 27,927

$ $

$ $

2010 14,627 2020 28,765

2011 $15,691.03 2021 $ 29,628

Company Valuation Total Value Shares Outstanding Per Share Value Margin of Safety Purchase Price Current Price Actual Discount

2012 $17,385.66 2022 $ 30,517

2013 $19,263.31 2023 $ 31,432

2014 $21,343.75 2024 $ 32,375

2015 $21,866.48 2025 $ 33,346

2016 $23,991.90 2026 $ 34,347

2017 $26,323.91 2027 $ 35,377

Free Cash Flow and Tangible Shareholder Equity Trend

$

208,780 2913 71.67 50% 35.84 55.83 22%

$ $ $

$30,000.0

$25,696.0 FCF

$25,000.0

Shareholder Equity

$19,971.0

$20,000.0

$15,330.0 $15,156.0 $13,451.0 $11,552.0

$15,000.0

$10,000.0 $5,000.0

$8,642.0

$5,994.0 $6,804.0 $4,669.0 $5,542.0 $2,845.0 $3,883.0 $6,381.0

$14,556.0 $8,458.0 $8,618.0

$10,630.0 $10,564.0$10,411.0

$1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Margin Percentages 80.0% 70.0%

68.3%

71.2%

71.1%

69.6%

69.3%

71.7%

70.9%

72.4%

71.8%

70.9%

60.0% Gross Margin

50.0%

Operating Margin Net Margin

40.0% 30.0% 20.0%

17.4% 12.9%

20.8% 15.2%

21.9% 16.5%

23.0% 17.2%

1999

2000

2001

27.1%

25.3%

24.7%

18.2%

17.2%

18.0%

2002

2003

2004

26.2% 20.6%

25.9% 20.7%

2005

2006

21.5% 17.3%

10.0% 0.0% 1998

Efficiency & Profitability

Debt

50.0% CROIC

45.0%

2007

FCF/Sales

ROA

ROE

100.0%

Debt to Equity

Capitalization Ratio

FCF to Debt

90.0%

40.0%

80.0%

35.0%

70.0%

30.0%

60.0%

25.0%

50.0%

20.0%

40.0%

15.0%

30.0%

10.0%

20.0%

5.0%

10.0% 0.0%

0.0% 1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Company Name

ticker

JOHNSON & JOHNSON

JNJ

2/18/2009

all figures in $Mil

Desired MOS

Growth

Discount %

50%

12.0%

9%

Price $

Share Value

55.83

$

71.67

Buy under $

Actual D/C % 52Wk High

35.84

22%

$

72.76

52Wk Low $

52.06

Historical Stock Price Vs Intrinsic Value Per Share 80 Historical Price

Intrinsic Value

Buy Price

Linear (Historical Price)

70

60

50

40

30

20

10

0 3/2/1998

3/2/1999

3/2/2000

3/2/2001

3/2/2002

3/2/2003

3/2/2004

3/2/2005

3/2/2006

3/2/2007

3/2/2008

Company Name

ticker

JOHNSON & JOHNSON

JNJ

2/18/2009

all figures in $Mil

User Input Params

Desired MOS

Growth

66%

12.0%

1998 $

Diluted EPS

$

Earnings Growth EPS Weighted Average Earnings Growth EPS Weighted Average

2008 4.45

Price $

Actual DC% Share Value

55.83

Buy under

$ 108.47

Earnings 2002 2003 $ 2.16 $ 2.40

$

1999 1.47

$

2000 1.70

$

2001 1.84

$

2009 4.78

$

2010 5.17

$

2011 5.74

$

P/B Ratio

49%

36.88

$

Net Net Working Capital

3.75

$

2004 2.84

$

(6.05) 2005 3.46

$

2006 3.73

$

2007 3.63

Multi-Year Performance 1998-2003 1999-2004 2000-2005 2001-2006 2002-2007 1998-2001 1999-2002 2000-2003 0.0% 14.1% 15.3% 15.2% 10.9% 0.0% 13.7% 12.2% $ 1.60 $ 2.07 $ 2.40 $ 2.74 $ 3.04 $ 1.25 $ 1.79 $ 2.03 2001-2004 2002-2005 2003-2006 2004-2007 Median (1998-2007) 13.9% 15.57% 17.01% 15.83% 8.52% $2.36 $ 2.31 $ 2.72 $ 3.11 $ 3.42

Company Stats Normal Earnings Expected 5 Year Growth 20 yr AA Corp Bond Rate Book Value Per Share Price to Book Ratio Enterprise Value Per Share

$

4.09 12.00% 5.86 14.87 3.75 66.08

$6.00 EPS Linear (EPS)

$5.00

$4.45

$4.00

$3.46

Per Share Value

$

Desired MOS Purchase Price Current Price Actual Discount

$ $

108.47 66.00% 36.88 55.83 49%

$3.63

2006

2007

$2.84

$3.00

$2.00

Company Valuation

$3.73

$4.78

$1.47

$1.70

$1.84

2000

2001

$2.16

$2.40

$1.00 $$1998

1999

2002

2003

2004

2005

2008

2009

Company Name

ticker

JOHNSON & JOHNSON

JNJ

2/18/2009

Enter Competitor Tickers Into Boxes Below

all figures in $Mil

JNJ

ABT

BMY

PG

BSX

NVS

Industry

Ranking

55.83

54.2

20.92

50.95

8.46

41.9

NA

NA

154,900

84,100

41,300

149,330

12,700

94,900

NA

NA

P/E Ratio (TTM)

12.27

17.77

13.37

13.6

0

11.74

3.38

4

Price to Sales (TTM)

2.44

2.83

2.04

1.76

1.59

2.22

0.89

2

Price to Book (MRQ) Price to Tangible Book (MRQ)

0 0

0 0

0 0

2.4 0

0.98 0

1.88 3.21

1.69 4.24

4 2

Price to Cash Flow (TTM) Price to Free Cash Flow (TTM)

0 0

0 0

0 0

9.71 23.65

0 0

10.08 12.52

1.43 116.88

3 3

Dividend Yield Dividend Yield - 5 Year Avg.

3.29 2.29

2.67 2.48

5.84 4.61

3.19 2.05

NA 0

4.12 1.95

0.14 1.57

3 3

Dividend 5 Year Growth Rate Payout Ratio (TTM)

14.18

8

2.06

12.08

0

15.96

20.57

2

0

0

0

39.47

0

41.17

5.97

3

-4.86 2.44

10.09 2.83

3.78 2.04

-3.18 1.76

-6.97 1.59

1.74 2.22

1.63 0.89

5 2

Sales - 5 Yr. Growth Rate

8.77

11.31

2

14

18.29

11.36

10.81

5

EPS (MRQ) vs Qtr. 1 Yr. Ago EPS (TTM) vs TTM 1 Yr. Ago

17.7 25.63

15.4 31.27

723.8 80.59

-2.27 12.93

-426.78 -315.8

61.46 27.59

-22.97 0

3 4

EPS - 5 Yr. Growth Rate Capital Spending - 5 Yr. Growth Rate

13.75 0

13.74 0

-0.01 0

14.53 15.5

0 0

17.76 8.46

10.51 1.79

3 3

0 0 0

0 0 0

0 0 0

0.46 0.69 31.75

1.43 1.7 51.32

0.91 1.27 4.33

2.72 3.15 11.28

4 4 4

0

0

0

66.9

51.34

14.64

16.02

4

Gross Margin (TTM)

70.96

57.29

68.95

50.7

69.33

73.14

8.7

2

Gross Margin - 5 Yr. Avg. EBITD Margin (TTM)

71.45 0

55.5 0

68.38 0

51.38 24.04

73.17 -9.55

73.01 23.94

66.37 0

3 3

Stock Price Market Cap (millions)

Valuation Ratios

Dividends

Growth Rates Sales (MRQ) vs Qtr. 1 Yr. Ago Sales (TTM) vs TTM 1 Yr. Ago

Financial Strength Quick Ratio (MRQ) Current Ratio (MRQ) LT Debt to Equity (MRQ) Total Debt to Equity (MRQ)

Profitability

0

0

0

23.53

2.48

28.68

22.6

4

26.56 25.45 26.56 25.45 20.31

19.28 17.16 19.83 17.8 16.03

26.56 21.03 26.56 21.03 20.15

20.04 19.51 18.96 18.46 14.3

-19.08 -5.42 -25.63 -10.46 -25.74

21.05 20.51 22.31 22.03 19.17

0.62 19.39 4.16 22.82 3.57

1 1 1 1

19.14

13.85

15.79

13.13

-12.33

18.87

13.54

0 0 0 0

0 0 0 0

0 0 0 0

8.46 9.09 11.18 12.05

-7.11 -4.7 -8 -5.39

10.62 10.32 13.57 13.45

0.78 7.64 1.01 9.52

0 0

0 0

0 0

18.41 21.61

-14.68 -9.54

16.33 16.47

1.43 10.49

Revenue/Employee (TTM) Net Income/Employee (TTM)

0 0

0 0

0 0

606370 86688

0 0

440281 84398

2444586 166242

NA NA

Receivable Turnover (TTM) Inventory Turnover (TTM)

0 0 0

0 0 0

0 0 0

11.43 5.13 0.59

5.54 3.13 0.28

6.23 2.03 0.55

0.48 0.24 0.08

NA NA

EBITD - 5 Yr. Avg. Operating Margin (TTM) Operating Margin - 5 Yr. Avg. Pre-Tax Margin (TTM) Pre-Tax Margin - 5 Yr. Avg. Net Profit Margin (TTM) Net Profit Margin - 5 Yr. Avg.

1 1

Management Effectiveness Return On Assets (TTM) Return On Assets - 5 Yr. Avg. Return On Investment (TTM) Return On Investment - 5 Yr Avg Return On Equity (TTM) Return On Equity - 5 Yr. Avg.

3 3 3 3 3 3

Efficiency

Asset Turnover (TTM)

4

Company Name

ticker

JOHNSON & JOHNSON

JNJ

2/18/2009

Net Profit Margin

Cash Flow (Continuing Operations) 21%

20%

21% 18%

17%

17%

18%

17%

15295 16%

15249

14248

15%

11877

13%

11131

10595 8176

8864 6563

5677

4886

TTM 2007/12 2006/12 2005/12 2004/12 2003/12 2002/12 2001/12 2000/12 1999/12 1998/12 20% 17% 21% 21% 18% 17% 18% 17% 16% 15% 13% 0.6% 14.7% 4.5% -5.4% 5.8% 4.3% 8.6% 17.3% -% Change -16.5%

TTM 2007/12 2006/12 2005/12 2004/12 2003/12 2002/12 2001/12 2000/12 1999/12 1998/12 15295 15249 14248 11877 11131 10595 8176 8864 6563 5677 4886 7.0% 20.0% 6.7% 5.1% 29.6% -7.8% 35.1% 15.6% 16.2% -% Change

Magic Formula Investing -- Return on Capital

Magic Formula Investing -- Earnings Yield

0.93

13.0%

0.77 0.66 0.57

0.64

0.66

0.70

0.60

0.63

0.70

0.77

10.5%

10.1%

8.9%

8.5%

9.8% 8.4% 6.3%

7.6%

7.5%

6.6%

Now 2007/12 2006/12 2005/12 2004/12 2003/12 2002/12 2001/12 2000/12 1999/12 1998/12 0.66 0.77 0.93 0.57 0.64 0.66 0.70 0.60 0.63 0.70 0.77 61.7% -10.8% -2.3% -6.1% 15.8% -3.8% -9.6% -9.7% -% Change -17.5%

Now 2007/12 2006/12 2005/12 2004/12 2003/12 2002/12 2001/12 2000/12 1999/12 1998/12 13.0% 10.1% 8.5% 10.5% 8.9% 9.8% 8.4% 6.3% 7.6% 7.5% 6.6% -18.6% 17.6% -9.4% 16.8% 32.8% -16.7% 1.0% 14.2% -% Change 18.9%

Return on Assets (ROA)

Return on Equity (ROE) 18%

14%

16%

16%

15%

16%

13%

15%

15%

14%

27.6% 12%

28.1% 24.4%

27.5%

26.7%

26.8%

29.1%

23.4%

25.5%

25.7%

22.5%

2008/09 2007/12 2006/12 2005/12 2004/12 2003/12 2002/12 2001/12 2000/12 1999/12 1998/12 14% 13% 16% 18% 16% 15% 16% 15% 15% 14% 12% -12.3% 11.9% 7.4% -8.6% 10.9% -3.9% 7.0% 22.2% -% Change -16.6%

2008/09 2007/12 2006/12 2005/12 2004/12 2003/12 2002/12 2001/12 2000/12 1999/12 1998/12 27.6% 24.4% 28.1% 27.5% 26.7% 26.8% 29.1% 23.4% 25.5% 25.7% 22.5% 2.2% 3.0% -0.4% -7.9% 24.4% -8.2% -0.8% 14.2% -% Change -13.2%

Current Ratio

Quick Ratio 2.2

2.5

2.3 2.0

1.6

1.5

1.2

1.7

1.7

1.9

2.2

1.7

1.8 1.4

2008/09 2007/12 2006/12 2005/12 2004/12 2003/12 2002/12 2001/12 2000/12 1999/12 1998/12 1.6 1.5 1.2 2.5 2.0 1.7 1.7 2.3 2.2 1.8 1.4 -51.7% 26.7% 14.7% 1.6% -26.7% 6.1% 22.2% 29.8% -% Change 25.9%

1.4

1.4

1.3 0.9

1.4

1.8 1.4

1.0

2008/09 2007/12 2006/12 2005/12 2004/12 2003/12 2002/12 2001/12 2000/12 1999/12 1998/12 1.4 1.3 0.9 2.2 1.7 1.4 1.4 1.9 1.8 1.4 1.0 -56.5% 28.3% 17.3% 3.5% -27.6% 9.0% 30.3% 33.6% -% Change 32.6%

Company Name

ticker

JOHNSON & JOHNSON

JNJ

2/18/2009

all figures in $Mil

Company Assessment: Quantitative Valuation

Criteria over 10yrs

Points

User Points

DCF Valuation Discount

> 25% or 50% depending on moat

22%

1

1

Graham Intrinsic Value Discount

> 66%

49%

0

Margins, Profit and Growth

Criteria over 10yrs

Median Revenue growth

10%

Median Gross Margin Median Operating Margin Median Net Margin Median EPS growth Business and Management Performance

Value

Points

Value

30%

11.3% 71.2%

1 1

15%

25.0%

1

10%

17.6%

1

10%

13.9%

1

Criteria over 10yrs

Points

Value

Cash growth from Operations CROIC is postive and capable of paying off financing

15%

13.4%

0

13%

Median FCF growth positive and consistent Median FCF/Sales

10%

28.4% 14.6%

2 1

Consistent over 10yrs

16.7% N/A

2

Consistent ROE (manually check) Consistent ROA (manually check)

Consistent over 10yrs

N/A

Balance Sheet

7%

Criteria for TTM

Current assets > 1.5 x current liabilities

> 1.5 x current liabilities

Price to Book ratio < 2 Debt to Equity FCF to Debt Capitalization Ratio Intangibles % of assets

1.5

1

N/A

3.75

N/A

< 100%

86.9%

> 10%

27.7%

< 30% < 15% of assets

14% 32.6%

User Points

N/A N/A Points

Value

User Points

1 1 1 0

User Points N/A

Company Assessment: Qualitative Johnson & Johnson is engaged in the research and development, manufacture and sale of a range of products in the healthcare field. Johnson & Johnson has more than 250 operating companies. The Company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. Sales of the Company's two largest products, RISPERDAL and REMICADE, accounted for approximately 6% and 5% of Johnson & Johnson�s total revenues, respectively, during the fiscal year ended December 30, 2007 (fiscal 2007). During fiscal 2007, the Company acquired three companies: Conor Medsystems, Inc., which is a cardiovascular device company, with new drug delivery technology; Robert Reid, Inc., which is a Japanese orthopedic product distributor, and Maya�s Mom, Inc., which is a social media company. In October 2008, the Company acquired HealthMedia, Inc. In December 2008, Johnson & Johnson acquired Omrix Biopharmaceuticals, Inc.

Competitive Advantage

Comment

Stable market share?

2

Max Points max 2

Dominant company in industry, segment? Low barriers to entry and exit?

2

max 2 max 2

Experience goods (brand effect, trademarks)

1 1

High switching costs?

1

max 2

Network effect? E.g. eBay

0

max 2

User Points

Max Points

1

max 2

Able to increase prices and retain customers? Compete on price? (1 for no, 0 for yes)

1 1

max 1 max 1

Barriers of entry to the business? Diverse customers? (1 for diverse, 0 for concentrated) Involved in competition? Monopoly, duopoly, crowded Company has a recurring revenue stream? Capital intensive company? (1 for no, 0 for yes)

0 1 1

max max max max max

Business Model Growth due to: a) existing product / existing market b) existing product / new market c) new product / existing market d) new product / new market

Comment (yes/no) (yes/no) (yes/no) (yes/no)

a) No b) Yes c) Yes d) Yes

User Points

1 0

max 2

1 1 2 1 1

Management High insider ownership? Candid management on positives and negatives? Management performance at previous jobs? Compensation levels compared to sales?

Comment

User Points 1 1 1 1

Max Points max 1 max 1 max 1 max 1

Industry Boring industry? (1 for slow, 0 for fast industry) Can company adapt to changing industry environment? Industry leader or lagger? (1 for leader, 0 for lagger)

Comment

User Points

Max Points

1 1 0

max 1 max 1 max 1

Psychological Factors to Consider. Not Weighted.

Comment

Recency bias? Hindsight bias? Framing issues correctly and in different manners? Is there a data framing bias? Am I too overconfident on the situation? Performed probability analysis for -ve factors? Too much loss aversion? Sunk cost mentality? Slow in changing opinion? Psychological denial ? Bias from commitment and consistency tendency? Pavlovian association? Social proof bias? Status quo bias? False consensus bais?

no no DCF, graham, compare to peers maybe no no no no no no no no no no no

Category

Total Points out of 5

Valuation Margins, Profit and Growth Business and Management Performance

1.0 5.0 2.5 4.0

Balance Sheet Competitive Advantage Business Model

2.9 3.0

Management

5.0

Low Risk

High Growth Under Valued

4.0

2.0

3.0

4.0

2.0

3.0

JNJ

Well Managed Good Financial Health Strong Moat 4.0

4.0

4.0 Low Risk 5.0 4.0

Strong Moat

4.0

3.0

High Growth

2.0 1.0 0.0

Good Financial Health

Under Valued

Well Managed