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Last update on 2024-06-05

Johnson & Johnson (JNJ) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Johnson & Johnson (JNJ) Piotroski F-Score Analysis for 2023 reveals a score of 6/9, highlighting its financial strength and performance.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 6

We're running Johnson & Johnson (JNJ) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
1
Operating Cashflow are higher than Netincome?
0
Leverage is declining?
0
Current Ratio is growing?
1
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
1

Johnson & Johnson (JNJ) scored a 6 out of 9 on the Piotroski F-Score, reflecting overall good financial health but with some areas needing improvement. Key highlights from the analysis show that JNJ consistently reports positive net income, demonstrated strong operating cash flow, and increased its return on assets. Conversely, the company did not meet the criterion of having its operating cash flow exceed net income, experienced an increase in leverage, and had a decline in gross margin. JNJ increased its current ratio and decreased outstanding shares, indicating improved liquidity and potential share buybacks. Lastly, the firm showed improved efficiency with a higher asset turnover ratio while underperforming in gross margin compared to the industry median.

Insights for Value Investors Seeking Stable Income

With a Piotroski score of 6, Johnson & Johnson (JNJ) is in a generally strong financial position and could be a good investment. The company shows consistent profitability, effective cash flow management, and improving operational efficiency. However, potential investors should consider the increased leverage, lower gross margin, and the discrepancy between operating cash flow and net income as areas for careful monitoring and consideration. Overall, it might be worth looking into JNJ as an investment opportunity, keeping an eye on the noted weaker points.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Johnson & Johnson (JNJ)

Company has a positive net income?

Net income is a key indicator of a company's profitability. It demonstrates the company’s ability to generate profit for shareholders.

Historical Net Income of Johnson & Johnson (JNJ)

In 2023, Johnson & Johnson (JNJ) reported a net income of $35,153,000,000. This figure is notably positive and reflects a significant increase from prior years. Notably, JNJ has consistently generated positive net income for the past 20 years, with the exception of a dip in 2017 when net income was $1.3 billion. The robust net income in 2023 highlights JNJ’s strong financial performance and profitability, thereby earning it 1 point in the Piotroski score assessment.

Company has a positive cash flow?

Cash Flow from Operations (CFO) is a key indicator of a company's financial health as it shows the cash that a company generates from its regular operations.

Historical Operating Cash Flow of Johnson & Johnson (JNJ)

For Johnson & Johnson (JNJ), the CFO in 2023 stands at $22.791 billion, indicating a positive cash flow. This is not just favorable for this year but also when looking at the historical data spanning 20 years; the trend shows consistent growth in CFO, starting from $10.595 billion in 2003 to the current $22.791 billion. This is a strong indicator of robust operational efficiency and consistent revenue generation, which is excellent for investors and stakeholders.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) evaluates the effectiveness of a company in using its assets to generate profit. It is crucial for identifying efficiency improvements or declines.

Historical change in Return on Assets (ROA) of Johnson & Johnson (JNJ)

In 2023, Johnson & Johnson's ROA increased to 0.1981 from 0.0971 in 2022, indicating a significant improvement in how effectively the company is utilizing its assets to generate profit. This positive trend earns a point. Over the last 20 years, JNJ's operating cash flow has generally increased, from $10.6 billion in 2003 to $22.8 billion in 2023, demonstrating strong operational performance. However, when compared to the industry median ROA, JNJ's rate is still relatively lower. The industry's median ROA has fluctuated, reaching up to 0.7596 in 2004 and standing at 0.7176 in 2023.

Operating Cashflow are higher than Netincome?

This criterion examines whether a company's operating cash flow exceeds its net income, signaling efficient earnings quality.

Historical accruals of Johnson & Johnson (JNJ)

For Johnson & Johnson (JNJ) in 2023, the operating cash flow stands at $22.79 billion, while the net income is significantly higher at $35.15 billion. This results in a score of 0 for this criterion, indicating that the company's earnings quality could be questioned. Historically, JNJ's operating cash flow has generally been higher relative to its net income, which had been viewed favorably. However, the significant discrepancy in 2023 could raise concerns regarding the sustainability of reported earnings and potential non-cash accrual impacts.

Liquidity of Johnson & Johnson (JNJ)

Leverage is declining?

The Change in Leverage measures financial risk. Lower leverage generally reflects greater financial stability and lower risk.

Historical leverage of Johnson & Johnson (JNJ)

The leverage ratio for Johnson & Johnson increased from 0.1435 in 2022 to 0.1545 in 2023, indicating heightened leverage. Historically, JNJ's leverage fluctuated but often remained below 0.2, except occasionally. This increase in 2023 implies added financial risk and, per Piotroski's criteria, garners 0 points.

Current Ratio is growing?

Increase in Current Ratio indicates an improvement in liquidity.

Historical Current Ratio of Johnson & Johnson (JNJ)

In 2023, Johnson & Johnson’s Current Ratio rose to 1.1558 from 0.9909 in 2022, marking an improvement in liquidity. Current Ratio is a critical insolvency metric that expresses the company's ability to pay off short-term liabilities with short-term assets. A Current Ratio below 1 implies that a company may not be able to cover its short-term liabilities with its short-term assets, while a ratio above 1 indicates adequate liquidity. Historically, Johnson & Johnson’s Current Ratio has fluctuated but has mostly stayed above the industry median, which was 1.2749 in 2023 compared to J&J’s 1.1558. In the chart, we see a slight rebound in the company's liquidity position in 2023, which is a positive sign concerning solvency. Hence, we add 1 point for improved liquidity.

Number of shares not diluted?

Change in Shares Outstanding is essential as it indicates how a company manages its equity structure.

Historical outstanding shares of Johnson & Johnson (JNJ)

The Outstanding Shares of Johnson & Johnson (JNJ) in 2022 were 2,613,597,000, which decreased to 2,533,500,000 in 2023. This reduction of approximately 80,097,000 shares signals that the company is possibly engaging in share buybacks, a positive sign suggesting the company believes its stock is undervalued, or it aims to improve financial ratios like EPS. Hence, this trend results in 1 point for JNJ in the Piotroski analysis criteria.

Operating of Johnson & Johnson (JNJ)

Cross Margin is growing?

The change in Gross Margin is a crucial indicator of a company's fiscal health, reflecting the balance between revenue and cost of goods sold.

Historical gross margin of Johnson & Johnson (JNJ)

The Gross Margin for Johnson & Johnson (JNJ) decreased to 0.6882 in 2023 from 0.6925 in 2022. This decline suggests slightly lower efficiency compared to the previous year. Additionally, the 20-year trend shows fluctuations with a general decline from 0.7091 in 2003 to the current 0.6882. When compared to the industry median, which improved to 0.7176 in 2023, JNJ's Gross Margin is still underperforming. Therefore, no point is awarded in this criterion.

Asset Turnover Ratio is growing?

Asset Turnover evaluates the efficiency of a company in using its assets to generate sales. Higher ratios indicate better performance.

Historical asset turnover ratio of Johnson & Johnson (JNJ)

In 2023, Johnson & Johnson's Asset Turnover increased to 0.4799 from 0.4331 in 2022. This improvement signifies a better utilization of assets to drive sales. The 10.8% increase not only indicates enhanced operational efficiency but also promises stronger revenue generation with the same asset base. Observing the trend over the last two decades reveals a general decline, but the recent uptick is a positive signal. Therefore, adding 1 point for the increasing Asset Turnover is justified.


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