Should You Buy Johnson & Johnson Stock Before Earnings?

by Rob Otman
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Johnson & Johnson (NYSE: JNJ) is a $358 billion company today. Investors that bought shares one year ago are sitting on a 10.56% total return. That's below the S&P 500's return of 16.05%.

Johnson & Johnson stock is underperforming the market. It's beaten down, but it reports earnings next week. So is it a good time to buy? To answer this question, we've turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.

Our system looks at six key metrics...

Earnings-per-Share (EPS) Growth: Johnson & Johnson reported a recent EPS growth rate of 0.62%. That's below the pharmaceuticals industry average of 242.54%. That's not a good sign. We like to see companies that have higher earnings growth.

Price-to-Earnings (P/E): The average price-to-earnings ratio of the pharmaceuticals industry is 113.93. And Johnson & Johnson's ratio comes in at 20.92. It's trading at a better value than many of its competitors.

Debt-to-Equity The debt-to-equity ratio for Johnson & Johnson stock is 46.02%. That's below the pharmaceuticals industry average of 57.48%. The company is less leveraged.

Free Cash Flow per Share Growth Johnson & Johnson's FCF has been lower than that of its competitors over the last year. That's not good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It's one of our most important fundamental factors.

Profit Margins The profit margin of Johnson & Johnson comes in at 24.89% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Johnson & Johnson's profit margin is above the pharmaceuticals average of 11.75%. So that's a positive indicator for investors.

Return on Equity Return on equity tells us how much profit a company produces with the money shareholders invest. The ROE for Johnson & Johnson is 23.09%, and that's above its industry average ROE of 17.77%.

Johnson & Johnson stock passes four of our six key metrics today. That's why our Investment U Stock Grader rates it as a Buy With Caution.

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Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That's why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth.

If you're interested in finding Strong Buy stocks yourself, check out Fundamental Analysis Pro. It's a free five-part mini-course that will teach you how to grade stocks like a Wall Street veteran. Click here to learn more.

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