Is the Time Ripe to Buy Johnson & Johnson (JNJ) Stock?

If you owned Johnson & Johnson (NYSE:JNJ) stock at the beginning of 2013, you’re sitting atop gains of more than 20% right now. If you didn’t own shares of J&J, you might be wishing that you did. Is the time still ripe to buy — or has the train left the station? Let’s take a look.

Taking a breather

After a stellar start in 2013, Johnson & Johnson (NYSE:JNJ) has taken a little breather since late May. Shares have pulled back slightly.

JNJ Chart

JNJ data by YCharts.

I actually view this as a good development. The S&P 500 index also pulled back during the same period, but Johnson & Johnson (NYSE:JNJ) shares retreated by less than half as much as the broader index. This reflects solid investor support for the stock.

It’s been a while since J&J enjoyed such a nice run. The company has encountered some rough spots over the last few years, particularly with product recalls and litigation woes. These issues even resulted in Warren Buffett dumping much of his stake, saying that Johnson & Johnson (NYSE:JNJ) had made “too many mistakes.”

Johnson & Johnson (NYSE:JNJ)

Relatively speaking

Of course, J&J hasn’t been alone in climbing this year. Many blue chips have performed well in 2013 thus far. Among its peers, though, Johnson & Johnson (NYSE:JNJ) stock looks to be one of the biggest winners.

Fellow pharmaceutical giant Pfizer Inc. (NYSE:PFE) saw its shares jump more than 20% by April. However, the stock has fallen quite a bit since then. Shares are now only up less than 13%.

Similarly, Merck & Co., Inc. (NYSE:MRK) was up more than 20% for the year in early June. The stock now claims year-to-date gains of 14%.

Although its quite smaller in terms of market cap, Abbott Laboratories (NYSE:ABT) has a business model closer to that of Johnson & Johnson than most other pharmaceutical firms. Abbott shares followed a similar path as Merck & Co., Inc. (NYSE:MRK) — up more than 20% before falling. The stock is now up around 14% for the year.

Since J&J didn’t pull back as much as some of its peers, is it now much pricier as a result? Not necessarily.

Its trailing price-to-earnings multiple of below 24 stands very close to that of Merck. Pfizer Inc. (NYSE:PFE) and Abbott Laboratories (NYSE:ABT) have significantly lower trailing P/E values of less than 14 and 11, respectively. However, looking ahead paints a different picture.

Abbott’s forward P/E of almost 16 ranks as the highest of the four companies. J&J trails with a forward P/E a little under 15. Meanwhile, Pfizer and Merck both have forward multiples between 12 and 13. Factoring in these expectations of future earnings makes Johnson & Johnson stock look reasonably priced in comparison with the other stocks.

Wonderful

For investors looking at the long run, Johnson & Johnson is nearly always worth consideration. Just as Warren Buffett said when discussing the company’s mistakes in recent years, J&J has “a lot of wonderful products and it’s got a wonderful balance sheet.”

I’d throw in a wonderful dividend yield to that mix. J&J’s yield currently stands at 3.2%. Is the time ripe to buy Johnson & Johnson stock? The signs point to it being a wonderful time.

The article Is the Time Ripe to Buy Johnson & Johnson Stock? originally appeared on Fool.com and is written by Keith Speights.

Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!