Financial performance and analysis of Johnson and Johnson

Johnson & Johnson Ratios

The company I have selected in Johnson & Johnson (NYSE: JNJ). The company is a multinational conglomerate that operates over 250 different companies in 57 countries. JNJ has three main business: consumer health care, medical devices and diagnostics, and pharmaceuticals. Consumer health care is comprised of seven different types of consumer products, sold in over 100 countries. This market is over-the-counter and targeted to the mass market. Medical devices and diagnostics includes surgical equipment, a range of diagnostic products. This group has nine key units the key target market is hospitals, with the exception of Johnson & Johnson Vision Care, which markets contact lens. The pharmaceuticals segment is broken down into three main units. JNJ largely focuses on serious diseases, and the products are targeted at consumers.

Over the past few years, JNJ has seen steady growth. Over the past couple of years, the growth pattern has accelerated, with income taking a strong leap in both 2006 and 2007. In 2006 this appears directly attributable to acquisitions - debt increased along with property/plant/equipment, in addition to a large spike in goodwill and intangibles. This was followed by a significant increase in operating expenses in 2007. The debt increase in 2006 was primarily attributable to a spike in short-term debt, and another debt increase in 2007 was mainly long-term debt. Further evidence of this is the spike in interest expense in 2007.

JNJ appears to have been able to maintain steady growth and absorb new companies without interrupting its earnings, as both earnings per share and dividends have consistently improved over the past five years. They pay out dividends at a much higher rate than do their industry and sector peers. JNJ has grown capital spending at a higher rat than the industry and sector averages.

Johnson & Johnson has maintained strong financial performance over the past five years. They generally operate around or better than the industry average on most key ratios. They've been able to maintain steady margins and sales growth over the past five years and have attained steady growth in line with the industry. Operating, pre-tax and net margins have all been consistently higher than those of comparable firms.

JNJ has maintained strong profitability over the time span. They have retained a steady gross margin over the past five years, which at 71.49% average is higher than the industry average and double that of the S&P. The gross profit has remained in a tight range between 70.9% and 72.26%. Given the strong improvements in sales, the broad range of companies within the group, and the acquisitions in recent years, this consistency is admirable. The result has been a consistent outperformance vs. their peers in terms of return on equity, return on investment and return on assets.