Intrinsic value of Johnson&Johnson - JNJ

Previous Close

$144.68

  Intrinsic Value

$171.32

stock screener

  Rating & Target

hold

+18%

Previous close

$144.68

 
Intrinsic value

$171.32

 
Up/down potential

+18%

 
Rating

hold

We calculate the intrinsic value of JNJ stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 388.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  10.60
  10.04
  9.54
  9.08
  8.67
  8.31
  7.98
  7.68
  7.41
  7.17
  6.95
  6.76
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.76
  5.68
  5.61
  5.55
  5.50
  5.45
  5.40
  5.36
  5.33
  5.29
  5.26
Revenue, $m
  84,554
  93,043
  101,915
  111,172
  120,815
  130,851
  141,288
  152,136
  163,411
  175,126
  187,302
  199,959
  213,119
  226,809
  241,055
  255,887
  271,337
  287,438
  304,226
  321,738
  340,016
  359,100
  379,035
  399,868
  421,648
  444,425
  468,255
  493,192
  519,297
  546,632
Variable operating expenses, $m
  59,384
  64,492
  69,830
  75,399
  81,201
  87,239
  93,518
  100,045
  106,828
  113,877
  112,689
  120,303
  128,221
  136,458
  145,029
  153,952
  163,247
  172,934
  183,035
  193,571
  204,567
  216,049
  228,043
  240,577
  253,681
  267,385
  281,721
  296,725
  312,430
  328,876
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  59,384
  64,492
  69,830
  75,399
  81,201
  87,239
  93,518
  100,045
  106,828
  113,877
  112,689
  120,303
  128,221
  136,458
  145,029
  153,952
  163,247
  172,934
  183,035
  193,571
  204,567
  216,049
  228,043
  240,577
  253,681
  267,385
  281,721
  296,725
  312,430
  328,876
Operating income, $m
  25,169
  28,551
  32,086
  35,773
  39,614
  43,612
  47,770
  52,091
  56,583
  61,250
  74,614
  79,655
  84,898
  90,351
  96,026
  101,935
  108,089
  114,503
  121,191
  128,167
  135,448
  143,051
  150,992
  159,291
  167,967
  177,041
  186,533
  196,468
  206,867
  217,756
EBITDA, $m
  37,405
  41,161
  45,086
  49,181
  53,447
  57,887
  62,504
  67,303
  72,291
  77,473
  82,860
  88,459
  94,281
  100,337
  106,639
  113,201
  120,036
  127,158
  134,585
  142,332
  150,418
  158,861
  167,680
  176,896
  186,531
  196,608
  207,149
  218,181
  229,730
  241,822
Interest expense (income), $m
  730
  1,867
  2,428
  3,011
  3,620
  4,255
  4,918
  5,607
  6,323
  7,068
  7,843
  8,647
  9,483
  10,352
  11,256
  12,196
  13,174
  14,193
  15,253
  16,359
  17,512
  18,714
  19,969
  21,280
  22,649
  24,079
  25,575
  27,139
  28,775
  30,488
  32,280
Earnings before tax, $m
  23,302
  26,123
  29,075
  32,153
  35,359
  38,695
  42,163
  45,768
  49,514
  53,407
  65,967
  70,172
  74,546
  79,096
  83,831
  88,761
  93,897
  99,250
  104,832
  110,656
  116,734
  123,081
  129,712
  136,642
  143,888
  151,466
  159,395
  167,692
  176,379
  185,476
Tax expense, $m
  6,292
  7,053
  7,850
  8,681
  9,547
  10,448
  11,384
  12,357
  13,369
  14,420
  17,811
  18,947
  20,127
  21,356
  22,634
  23,965
  25,352
  26,797
  28,305
  29,877
  31,518
  33,232
  35,022
  36,893
  38,850
  40,896
  43,037
  45,277
  47,622
  50,078
Net income, $m
  17,010
  19,070
  21,225
  23,472
  25,812
  28,247
  30,779
  33,411
  36,145
  38,987
  48,156
  51,226
  54,418
  57,740
  61,196
  64,795
  68,545
  72,452
  76,527
  80,779
  85,216
  89,849
  94,690
  99,749
  105,038
  110,570
  116,358
  122,415
  128,757
  135,397

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  173,979
  191,446
  209,703
  228,749
  248,591
  269,240
  290,715
  313,038
  336,236
  360,342
  385,395
  411,438
  438,517
  466,685
  495,998
  526,517
  558,306
  591,436
  625,979
  662,013
  699,621
  738,889
  779,908
  822,774
  867,588
  914,456
  963,487
  1,014,799
  1,068,513
  1,124,757
Adjusted assets (=assets-cash), $m
  173,979
  191,446
  209,703
  228,749
  248,591
  269,240
  290,715
  313,038
  336,236
  360,342
  385,395
  411,438
  438,517
  466,685
  495,998
  526,517
  558,306
  591,436
  625,979
  662,013
  699,621
  738,889
  779,908
  822,774
  867,588
  914,456
  963,487
  1,014,799
  1,068,513
  1,124,757
Revenue / Adjusted assets
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
Average production assets, $m
  55,467
  61,036
  66,857
  72,929
  79,255
  85,838
  92,685
  99,801
  107,197
  114,883
  122,870
  131,173
  139,806
  148,787
  158,132
  167,862
  177,997
  188,559
  199,572
  211,060
  223,050
  235,570
  248,647
  262,314
  276,601
  291,543
  307,175
  323,534
  340,659
  358,590
Working capital, $m
  -2,029
  -2,233
  -2,446
  -2,668
  -2,900
  -3,140
  -3,391
  -3,651
  -3,922
  -4,203
  -4,495
  -4,799
  -5,115
  -5,443
  -5,785
  -6,141
  -6,512
  -6,899
  -7,301
  -7,722
  -8,160
  -8,618
  -9,097
  -9,597
  -10,120
  -10,666
  -11,238
  -11,837
  -12,463
  -13,119
Total debt, $m
  44,957
  55,752
  67,034
  78,805
  91,067
  103,829
  117,100
  130,895
  145,232
  160,130
  175,612
  191,707
  208,442
  225,849
  243,965
  262,825
  282,471
  302,945
  324,293
  346,562
  369,804
  394,071
  419,421
  445,912
  473,608
  502,572
  532,873
  564,584
  597,779
  632,538
Total liabilities, $m
  107,519
  118,314
  129,596
  141,367
  153,629
  166,391
  179,662
  193,457
  207,794
  222,692
  238,174
  254,269
  271,004
  288,411
  306,527
  325,387
  345,033
  365,507
  386,855
  409,124
  432,366
  456,633
  481,983
  508,474
  536,170
  565,134
  595,435
  627,146
  660,341
  695,100
Total equity, $m
  66,460
  73,132
  80,106
  87,382
  94,962
  102,850
  111,053
  119,580
  128,442
  137,651
  147,221
  157,169
  167,514
  178,274
  189,471
  201,129
  213,273
  225,928
  239,124
  252,889
  267,255
  282,256
  297,925
  314,300
  331,419
  349,322
  368,052
  387,653
  408,172
  429,657
Total liabilities and equity, $m
  173,979
  191,446
  209,702
  228,749
  248,591
  269,241
  290,715
  313,037
  336,236
  360,343
  385,395
  411,438
  438,518
  466,685
  495,998
  526,516
  558,306
  591,435
  625,979
  662,013
  699,621
  738,889
  779,908
  822,774
  867,589
  914,456
  963,487
  1,014,799
  1,068,513
  1,124,757
Debt-to-equity ratio
  0.680
  0.760
  0.840
  0.900
  0.960
  1.010
  1.050
  1.090
  1.130
  1.160
  1.190
  1.220
  1.240
  1.270
  1.290
  1.310
  1.320
  1.340
  1.360
  1.370
  1.380
  1.400
  1.410
  1.420
  1.430
  1.440
  1.450
  1.460
  1.460
  1.470
Adjusted equity ratio
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  17,010
  19,070
  21,225
  23,472
  25,812
  28,247
  30,779
  33,411
  36,145
  38,987
  48,156
  51,226
  54,418
  57,740
  61,196
  64,795
  68,545
  72,452
  76,527
  80,779
  85,216
  89,849
  94,690
  99,749
  105,038
  110,570
  116,358
  122,415
  128,757
  135,397
Depreciation, amort., depletion, $m
  12,236
  12,610
  13,000
  13,408
  13,833
  14,274
  14,734
  15,211
  15,708
  16,224
  8,246
  8,804
  9,383
  9,986
  10,613
  11,266
  11,946
  12,655
  13,394
  14,165
  14,970
  15,810
  16,688
  17,605
  18,564
  19,567
  20,616
  21,714
  22,863
  24,066
Funds from operations, $m
  29,246
  31,680
  34,225
  36,880
  39,645
  42,521
  45,513
  48,622
  51,853
  55,211
  56,402
  60,029
  63,801
  67,725
  71,809
  76,061
  80,491
  85,107
  89,921
  94,944
  100,186
  105,659
  111,378
  117,354
  123,602
  130,137
  136,974
  144,129
  151,620
  159,464
Change in working capital, $m
  -194
  -204
  -213
  -222
  -231
  -241
  -250
  -260
  -271
  -281
  -292
  -304
  -316
  -329
  -342
  -356
  -371
  -386
  -403
  -420
  -439
  -458
  -478
  -500
  -523
  -547
  -572
  -599
  -627
  -656
Cash from operations, $m
  29,441
  31,884
  34,438
  37,102
  39,876
  42,762
  45,763
  48,883
  52,124
  55,492
  56,694
  60,333
  64,117
  68,054
  72,151
  76,417
  80,862
  85,494
  90,324
  95,364
  100,624
  106,117
  111,856
  117,854
  124,125
  130,684
  137,546
  144,728
  152,246
  160,120
Maintenance CAPEX, $m
  -3,367
  -3,723
  -4,096
  -4,487
  -4,895
  -5,319
  -5,761
  -6,220
  -6,698
  -7,194
  -7,710
  -8,246
  -8,804
  -9,383
  -9,986
  -10,613
  -11,266
  -11,946
  -12,655
  -13,394
  -14,165
  -14,970
  -15,810
  -16,688
  -17,605
  -18,564
  -19,567
  -20,616
  -21,714
  -22,863
New CAPEX, $m
  -5,305
  -5,569
  -5,820
  -6,072
  -6,326
  -6,583
  -6,847
  -7,117
  -7,396
  -7,686
  -7,987
  -8,303
  -8,633
  -8,980
  -9,345
  -9,730
  -10,135
  -10,562
  -11,013
  -11,488
  -11,990
  -12,519
  -13,078
  -13,666
  -14,287
  -14,942
  -15,632
  -16,359
  -17,125
  -17,931
Cash from investing activities, $m
  -8,672
  -9,292
  -9,916
  -10,559
  -11,221
  -11,902
  -12,608
  -13,337
  -14,094
  -14,880
  -15,697
  -16,549
  -17,437
  -18,363
  -19,331
  -20,343
  -21,401
  -22,508
  -23,668
  -24,882
  -26,155
  -27,489
  -28,888
  -30,354
  -31,892
  -33,506
  -35,199
  -36,975
  -38,839
  -40,794
Free cash flow, $m
  20,769
  22,592
  24,521
  26,543
  28,655
  30,860
  33,156
  35,545
  38,030
  40,612
  40,997
  43,784
  46,680
  49,691
  52,820
  56,075
  59,461
  62,986
  66,657
  70,482
  74,469
  78,628
  82,969
  87,500
  92,232
  97,178
  102,347
  107,753
  113,408
  119,325
Issuance/(repayment) of debt, $m
  10,376
  10,795
  11,282
  11,770
  12,262
  12,762
  13,271
  13,795
  14,336
  14,898
  15,483
  16,094
  16,735
  17,408
  18,115
  18,861
  19,646
  20,474
  21,348
  22,269
  23,242
  24,268
  25,350
  26,491
  27,695
  28,964
  30,301
  31,711
  33,195
  34,759
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  10,376
  10,795
  11,282
  11,770
  12,262
  12,762
  13,271
  13,795
  14,336
  14,898
  15,483
  16,094
  16,735
  17,408
  18,115
  18,861
  19,646
  20,474
  21,348
  22,269
  23,242
  24,268
  25,350
  26,491
  27,695
  28,964
  30,301
  31,711
  33,195
  34,759
Total cash flow (excl. dividends), $m
  31,145
  33,387
  35,804
  38,313
  40,918
  43,621
  46,427
  49,341
  52,366
  55,510
  56,479
  59,878
  63,415
  67,098
  70,935
  74,935
  79,107
  83,460
  88,004
  92,751
  97,711
  102,896
  108,318
  113,991
  119,927
  126,142
  132,649
  139,464
  146,603
  154,084
Retained Cash Flow (-), $m
  -6,300
  -6,673
  -6,974
  -7,276
  -7,580
  -7,888
  -8,203
  -8,527
  -8,862
  -9,209
  -9,570
  -9,948
  -10,344
  -10,760
  -11,198
  -11,658
  -12,144
  -12,655
  -13,195
  -13,765
  -14,366
  -15,000
  -15,669
  -16,375
  -17,119
  -17,903
  -18,730
  -19,601
  -20,519
  -21,485
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  24,845
  26,714
  28,830
  31,037
  33,338
  35,733
  38,224
  40,813
  43,505
  46,301
  46,909
  49,930
  53,071
  56,338
  59,738
  63,277
  66,963
  70,804
  74,809
  78,986
  83,345
  87,896
  92,649
  97,616
  102,809
  108,238
  113,919
  119,862
  126,084
  132,599
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  23,821
  24,456
  25,090
  25,556
  25,841
  25,933
  25,824
  25,509
  24,991
  24,274
  22,276
  21,307
  20,179
  18,914
  17,538
  16,080
  14,570
  13,039
  11,518
  10,037
  8,621
  7,293
  6,072
  4,972
  3,999
  3,158
  2,445
  1,854
  1,376
  998
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Johnson & Johnson is a holding company, which is engaged in the research and development, manufacture and sale of a range of products in the healthcare field. It operates through three segments: Consumer, Pharmaceutical and Medical Devices. Its primary focus is products related to human health and well-being. The Consumer segment includes a range of products used in the baby care, oral care, skin care, over-the-counter pharmaceutical, women's health and wound care markets. The Pharmaceutical segment is focused on five therapeutic areas, including immunology, infectious diseases, neuroscience, oncology, and cardiovascular and metabolic diseases. The Medical Devices segment includes a range of products used in the orthopedic, surgery, cardiovascular, diabetes care and vision care fields. Its research facilities are located in the United States, Belgium, Brazil, Canada, China, France, Germany, India, Israel, Japan, the Netherlands, Singapore, Switzerland and the United Kingdom.

FINANCIAL RATIOS  of  Johnson&Johnson (JNJ)

Valuation Ratios
P/E Ratio 23.7
Price to Sales 5.4
Price to Book 5.6
Price to Tangible Book
Price to Cash Flow 20.9
Price to Free Cash Flow 25.2
Growth Rates
Sales Growth Rate 2.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -6.8%
Cap. Spend. - 3 Yr. Gr. Rate -2.1%
Financial Strength
Quick Ratio 9
Current Ratio 0
LT Debt to Equity 31.9%
Total Debt to Equity 38.5%
Interest Coverage 28
Management Effectiveness
Return On Assets 12.5%
Ret/ On Assets - 3 Yr. Avg. 12.4%
Return On Total Capital 17.5%
Ret/ On T. Cap. - 3 Yr. Avg. 17.6%
Return On Equity 23.4%
Return On Equity - 3 Yr. Avg. 22.6%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 69.9%
Gross Margin - 3 Yr. Avg. 69.6%
EBITDA Margin 33.8%
EBITDA Margin - 3 Yr. Avg. 33.7%
Operating Margin 27.5%
Oper. Margin - 3 Yr. Avg. 27.5%
Pre-Tax Margin 27.5%
Pre-Tax Margin - 3 Yr. Avg. 27.5%
Net Profit Margin 23%
Net Profit Margin - 3 Yr. Avg. 22.3%
Effective Tax Rate 16.5%
Eff/ Tax Rate - 3 Yr. Avg. 18.9%
Payout Ratio 52.1%

JNJ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the JNJ stock intrinsic value calculation we used $76450 million for the last fiscal year's total revenue generated by Johnson&Johnson. The default revenue input number comes from 0001 income statement of Johnson&Johnson. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our JNJ stock valuation model: a) initial revenue growth rate of 10.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for JNJ is calculated based on our internal credit rating of Johnson&Johnson, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Johnson&Johnson.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of JNJ stock the variable cost ratio is equal to 71.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for JNJ stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Johnson&Johnson.

Corporate tax rate of 27% is the nominal tax rate for Johnson&Johnson. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the JNJ stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for JNJ are equal to 65.6%.

Life of production assets of 14.9 years is the average useful life of capital assets used in Johnson&Johnson operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for JNJ is equal to -2.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $60160 million for Johnson&Johnson - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 2682.76 million for Johnson&Johnson is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Johnson&Johnson at the current share price and the inputted number of shares is $388.1 billion.

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