QS Research · Michael Burry's Scion Capital analyst template · 2006
JOHNSON & JOHNSON (JNJ)
As of 2026-11-08 · 13/15 boxes filled from SEC filings and market data
Conclusion: PASS
Conviction low · base case none · downside -15% · upside +10%
At $276.22 JNJ trades at 41.3x TTM GAAP net income and 25.8x EV/EBITDA, a premium to PG's 17.7x, and the stock is only 2.1% below its 52-week high. Section 13's -41%/+21% peer-multiple cases assume a rerating; rule 1 does not allow that, so I value the same TTM base at JNJ's own 41.3x P/E: base ~$276, downside ~$235 (-15%) on a 15% earnings cut from STELARA/IRA, upside ~$304 (+10%) on a 10% earnings lift as the talc charge rolls off. The market is not missing a cheap asset: it is paying full price for quality, cash flow and pipeline, while the Q3 talc charge and STELARA loss of exclusivity are real noise. With no 30% upside and no -30% short case, this is a pass.
Key numbers
- Share price: $276.22
- Market cap: $664.95B
- Latest financial period: TTM to Sep 27, 2026
- Revenue (TTM): $99.33B
- EV / EBITDA (TTM): 25.8x
- P/E (TTM): 41.3x
- Price / book: 8.16x
The 15 boxes
- ✓ 1. Long-form business notes
J&J now runs two segments — Innovative Medicine and MedTech — versus three (Consumer Health, Pharmaceutical, Medical Devices) in the oldest 10-K on file, with revenue of $94.19B in the fiscal year ended 2025-12-28 against $82.58B in the fiscal year ended 2021-01-03. The franchise is concentrated: DARZALEX/DARZALEX FASPRO were ~15.0% of fiscal 2025 revenue, STELARA ~6.5% and TREMFYA ~5.5%, and STELARA faces biosimilar erosion the company says will continue. Cash generation is steady ($24.53B operating cash flow, $4.83B capex, $5.95B buybacks in the fiscal year ended 2025-12-28) while the mix has shifted toward oncology and MedTech, with an Orthopaedics separation announced in October 2025 and IRA Medicare pricing now applying to selected products.
- ✓ 2. Competitive advantage
The sources support a mixed moat: JNJ competes in all product lines and geographies against companies of all sizes, with patents, new-product cadence, manufacturing scale and reputation as the main levers, but patent loss and generic/biosimilar entry can cut sales quickly. Gross margin stayed roughly 66-70% across the six fiscal years shown and operating cash flow was $24.53B in the fiscal year ended 2025-12-28, consistent with scale and pricing power but not proof of a wide moat. The 10-K does not name specific competitors or give segment margins or return-on-capital data.
- ✓ 3. 10-Q takeaways
Q3 2026 sales rose 5.9% reported to $25,399M (6.0% operational), led by U.S. +9.1% and Innovative Medicine +7.7%, with MedTech at +2.5% and STELARA an approximate 690 bps drag. GAAP EPS of $0.09 is not an operating number: it carries a one-time special charge for the proposed talc litigation resolution plus the Firefly Bio acquisition and Sail Biomedicines collaboration; adjusted EPS was $2.59, down 7.5%. Free cash flow for the third-quarter year to date was ~$15,100M and 2026 guidance was raised to a reported sales midpoint of $101.2B (+7.4%) and adjusted EPS midpoint of $11.10 (+2.9%). The newest risk factors, per the computed 10-K diff, all concern the planned Orthopaedics separation.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ✓ 11. Impression of the shareholder letter
Filled; members read this box.
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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