Research, Analyze, and Value Johnson & Johnson stock (NYSE listed)

As a new junior analyst for your firm, your first assignment is to research, analyze, and value Johnson & Johnson stock (NYSE listed).  Your boss recommends determining prices based on both the discounted cash flow method and comparable P/E ratio method.  You are concerned about your boss’s recommendation because your Corporate Finance professor explained that these two valuation methods can result in widely differing estimates when using real data. You are hoping the two methods will reach similar prices. Good luck with that!Your assignment is:

  1. Find and download the Johnson & Johnson 2020 Annual Report including Form 10-K for the fiscal year ending December 31, 2020.
  2. Go to Reuters (http://www.reuters.com) and enter the symbol for Johnson & Johnson (JNJ) in the search box at the top of the web page (select Johnson & Johnson JNJ).  From the Reuters website collect the following information (you should be able to find this in the free sections) and enter it into an Excel spreadsheet:
    1. The current stock price (last trade – upper left of page)
    2. The EPS (TTM)
    3. The number of shares outstanding
    4. The Industry PE Ratio (TTM) – you may need to look elsewhere for this.
  3. From the Key Metrics tab scroll down to find the Revenue Growth Rate (5Y), enter the number in your spreadsheet.
  4. Go to Morningstar (http://www.morningstar.com) and enter “JNJ” into the “Search Quotes and Site” box. Select Johnson & Johnson under the U.S. Securities section.  Under “Financials” click Income Statement.  Copy and paste (or use “Export to Excel to create anew file) the most recent three years (2018-2020) of income statements into a new worksheet in your existing Excel file.  Repeat this for the balance sheets and the cash flow statements for Johnson & Johnson.  Keep (or copy) all the different financial statement data in the same Excel worksheet NOTE: Make sure you are collecting the Annual data, NOT the Quarterly data.
  5. To determine the stock value using the discounted cash flow method:
    1. Forecast the free cash flows.  Start by using the historical data from the financial statements downloaded from Morningstar to compute the three-year average of the following ratios:
      1. EBIT/Sales
      2. Tax Rate (income tax expense/income before tax)
      3. Property, plant & equipment/Sales
      4. Depreciation/property, plant & equipment
      5. Net working capital/sales
    2. Create an empty timeline for the next five years
    3. Forecast future sales based on the most recent year’s total revenue growing at the LT growth rate (5Y average) from Reuters for the first five years of the forecast.
    4. Use the average ratios from step 5. a. above to forecast EBIT, property plant & equipment, depreciation, and net working capital for the next five years.
    5. Forecast the the free cash flow for the next five years using Eq. 10.2 from the text (Section 10.1 in text).
    6. Determine the horizon enterprise value for year 5 using Eq. 10.6 and a long-term growth rate of 4% and a cost of capital of 11% for JNJ.
    7. Determine the enterprise value of the firm as the present value of the free cash flows.
    8. Determine the stock price using Eq. 10.4. Note: your enterprise value is in thousands of dollars and the number of shares outstanding Is in billions.
  6. To calculate an estimate of the JNJ price based on a comparable P/E Ratio, multiply the industry average P/E ratio by JNJ EPS.
  7. Compare the stock values from both methods to the actual stock price

two-page summarizing analysis and valuation with a few brief summary exhibits explaining how your analysis and outlook are quantified in your valuation model.  Would you recommend investing in the company? Why or why not?

Don't use plagiarized sources. Get Your Custom Essay on
Research, Analyze, and Value Johnson & Johnson stock (NYSE listed)
Just from $13/Page
Order Essay
Academic Heros
Calculate your paper price
Pages (550 words)
Approximate price: -

Why Work with Us

Top Quality and Well-Researched Papers

Our writers are encouraged to read and research widely to have rich information before writing clients’ papers. Therefore, be it high school or PhD level paper, it will always be a well-researched work handled by experts.

Professional and Experienced Academic Writers

For one to become part of our team, thorough interview and vetting is undertaken to make sure their academic level and experience are beyond reproach, hence enabling us give our clients top quality work.

Free Unlimited Revisions

Once you have received your paper and feel that some issues have been missed, just request for revision and it will be done. In addition, you can present your work to the tutor and he/she asks for improvement/changes, we are always ready to assist.

Prompt Delivery and 100% Money-Back-Guarantee

All our papers are sent to the clients before the deadline to allow them time to review the work before presenting to the tutor. If for some reason we feel our writers cannot meet the deadline, we will contact you to ask for more time. If this is not possible, then the paid amount will be refunded.

Original & Confidential

Our writers have been trained to ensure work produced is free of plagiarism. Software to check originality are also applied. Our clients’ information is highly guarded from third parties to ensure confidentiality is maintained.

24/7 Customer Support

Our support team is available 24 hours, 7 days a week. You can reach the team via live chat, email or phone call. You can always get in touch whenever you need any assistance.

Try it now!

Calculate the price of your order

Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

You have had a hectic day, and still need to complete your assignment, yet it is late at night. No need to panic. Place your order with us, retire to bed, and once you wake up, the paper will be ready.

Essays

Essay Writing Service

It does not matter the urgency of your paper, or the academic level, our team is ready to help you 24/7. Just contact us and all your academic needs will be sorted.

Admissions

Admission Essays & Business Writing Help

A student is often required to write an admission letter requesting to be admitted in a certain institution. For you to be gain that admission in your dream institution, you must write a convincing letter. You can depend on our team for the best admission letters.

Reviews

Editing Support

Academic writing is not just about getting information and throwing it all over. Our team will ensure you have a polished paper that is coherent and has a good flow of information. We also ensure the paper follows the correct formatting styles like APA, Harvard, MLA, Chicago/Turabian.

Reviews

Revision Support

If our writers write a paper but you are not satisfied in one way or another, you can always ask for revision. This is totally free. Our writers and editors will revise your paper untill you are be totally satisfied. We as well offer revision for papers not done by our writers at a small fee.