Should You Buy Johnson & Johnson Stock Now?

President Trump’s executive order, which aimed to lower U.S. drug prices to align with international rates, initially triggered a negative market reaction for pharmaceutical stocks. However, these stocks subsequently rebounded as Wall Street analysts pointed out the substantial legal obstacles the order would encounter. The pharmaceutical industry maintains that the higher drug prices in the U.S. are essential for funding the research and development (R&D) that leads to innovative treatments, suggesting that price controls would directly jeopardize their significant R&D investments.

The potential implementation of the executive order poses a threat to major pharmaceutical companies, including Johnson & Johnson (NYSE:JNJ). This leads us to the crucial question of whether JNJ represents a favorable investment at its current trading price of around $155. Our analysis suggests it is. While acknowledging minor concerns, we find JNJ’s present valuation to be reasonable. This conclusion is based on a comparison of its current valuation against its recent operating performance and its current and historical financial health. Our assessment across key metrics—Growth, Profitability, Financial Stability, and Downturn Resilience—indicates Johnson & Johnson possesses strong operating performance and a sound financial condition, as elaborated below. That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative — having outperformed the S&P 500 and generated returns exceeding 91% since its inception.

Image by Renate Köppel from Pixabay

How Does Johnson & Johnson’s Valuation Look vs. The S&P 500?

Going by what you pay per dollar of sales or profit, JNJ stock is currently valued in line with the broader market.

• Johnson & Johnson has a price-to-sales (P/S) ratio of 4.2 vs. a figure of 2.8 for the S&P 500
• Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 15.5 compared to 17.6 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 26.7 vs. the benchmark’s 24.5

How Have Johnson & Johnson’s Revenues Grown Over Recent Years?

Johnson & Johnson’s Revenues have grown marginally over recent years.

• Johnson & Johnson has seen its top line grow at an average rate of 4.1% over the last 3 years (vs. increase of 6.2% for S&P 500)
• Its revenues have grown 4.3% from $86 Bil to $89 Bil in the last 12 months (vs. growth of 5.3% for S&P 500)
• Also, its quarterly revenues grew 5.3% to $22 Bil in the most recent quarter from $21 Bil a year ago (vs. 4.9% improvement for S&P 500)

How Profitable Is Johnson & Johnson?

Johnson & Johnson’s profit margins are around the median level for companies in the Trefis coverage universe.

• Johnson & Johnson’s Operating Income over the last four quarters was $22 Bil, which represents a moderate Operating Margin of 24.9% (vs. 13.1% for S&P 500)
• Johnson & Johnson’s Operating Cash Flow (OCF) over this period was $24 Bil, pointing to a moderate OCF Margin of 27.3% (vs. 15.7% for S&P 500)
• For the last four-quarter period, Johnson & Johnson’s Net Income was $14 Bil – indicating a moderate Net Income Margin of 15.8% (vs. 11.3% for S&P 500)

Does Johnson & Johnson Look Financially Stable?

Johnson & Johnson’s balance sheet looks strong.

• Johnson & Johnson’s Debt figure was $37 Bil at the end of the most recent quarter, while its market capitalization is $371 Bil (as of 5/12/2025). This implies a strong Debt-to-Equity Ratio of 9.8% (vs. 21.5% for S&P 500). [Note: A low Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $39 Bil of the $194 Bil in Total Assets for Johnson & Johnson.  This yields a strong Cash-to-Assets Ratio of 13.6% (vs. 15.0% for S&P 500)

How Resilient Is JNJ Stock During A Downturn?

JNJ stock has been more resilient than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on JNJ stock? Our dashboard How Low Can Johnson & Johnson Stock Go In A Market Crash? has a detailed analysis of how the stock performed during and after previous market crashes.

Inflation Shock (2022)

• JNJ stock fell 21.7% from a high of $186.01 on 25 April 2022 to $145.60 on 27 October 2023, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $167.70 on 10 March 2025 and currently trades at around $155

COVID-19 Pandemic (2020)

• JNJ stock fell 27.8% from a high of $153.99 on 5 February 2020 to $111.14 on 23 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 23 April 2020

Global Financial Crisis (2008)

• JNJ stock fell 35.5% from a high of $72.22 on 8 September 2008 to $46.60 on 9 March 2009, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 18 October 2012

Putting All The Pieces Together: What It Means For JNJ Stock

In summary, Johnson & Johnson’s performance across the parameters detailed above are as follows:

• Growth: Neutral
• Profitability: Neutral
• Financial Stability: Very Strong
• Downturn Resilience: Strong
• Overall: Strong

Overall, Johnson & Johnson (JNJ) has performed strongly across the assessed parameters. While its valuation relative to the benchmark index is moderate, it appears attractive when compared to its own historical average. Specifically, the current price-to-earnings (P/E) ratio of 15 times its trailing adjusted earnings looks appealing compared to its five-year average P/E of 17 times. Therefore, we believe JNJ stock represents a good buying opportunity at its current level of approximately $155.

While JNJ stock may see higher levels, consider the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.

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