We find Johnson & Johnson to be extremely overvalued versus Merck. Here are the factors we considered:
P/S Ratio
JNJ's P/S multiple of 5.4x is
substantially higher than the figure of 4.0x for MRK
Revenue Growth
Over the last twelve months, Johnson & Johnson has seen revenues change by -1% -
lower than the figure of 3% for MerckIn the twelve-month period before that, revenues for Johnson & Johnson had changed by 0.4% -
lower than the 10.2% change for Merck
Operating Margin
Johnson & Johnson's operating margin was 24.3% for the most recent twelve-month period, which is
lower than Merck's operating margin of 26.9%Over the last twelve months, the operating margin for Johnson & Johnson changed by 0.2 pp (percentage points) -
worse than the change of 1.3 pp for MerckIn the twelve-month period before that, the operating margin for Johnson & Johnson had changed by 1.6 pp -
notably worse than the change of 8 pp for Merck over the same period
Note: JNJ reports its results on a fiscal year ending 12/29
Johnson & Johnson Merck Valuation: Current Market Cap $434 Bil $190 Bil Current P/S Multiple 5.4x 4.0xJohnson & Johnson substantially higher Revenues: Total Revenue (LTM) $81 Bil $47 Bil LTM Revenue Growth (Current) -1% 3%Johnson & Johnson lower LTM Revenue Growth (Year-ago) 0.4% 10%Johnson & Johnson lower Operating Income/Margin: Operating Income (LTM) $20 Bil $13 Bil Operating Margin (LTM) 24% 27%Johnson & Johnson lower LTM Margin Change (Current) 0.2 pp 1.3 ppSimilar for both companies LTM Margin Change (Year-ago) 1.6 pp 8 ppJohnson & Johnson notably worse