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Johnson & Johnson stock price sell-off makes valuations attractive

Johnson & Johnson

Johnson & Johnson (NYSE: JNJ) stock price has been under pressure over the past two weeks despite beating third-quarter revenue estimates and raising a full-year outlook from the prior-year period.

The sell-off is blamed on broader market volatility amid the resurgence of coronavirus cases. The company’s announcement of pausing its coronavirus vaccine trials has also negatively impacted investor’s sentiments. Johnson & Johnson stock is currently trading around $144, down from a 52-weeks high of $155 a share. Its shares slid close to 7% since the beginning of this year.

JNJ Johnson & Johnson daily Stock Chart
Johnson & Johnson stock performance. Finviz chart

Financial numbers remain strong

The company appears in a strong financial position as its strategy of introducing innovative products and technologies is helping in sustaining the growth trend.

Its third-quarter revenue of $21.08 billion grew 1.7% from the past year period, beating the consensus estimate by $930 million. The revenue from the pharmaceutical business segment, the largest revenue source for JNJ, reported a 5% year-over-year growth in the third quarter.

The company has also been turning revenue growth into big profits. Its third-quarter earnings per share jumped 3.8% from the past year period.

Moreover, Johnson & Johnson has raised the revenue and earnings outlook for the full year, citing strong underlying business fundamentals.

“The resilient mindset, combined with our strategic capabilities and execution excellence, increase our optimism for continued recovery in 2020 and strong momentum entering into 2021,” Alex Gorsky, chairman, and the chief executive officer said.

Sell-off makes valuations attractive

Johnson & Johnson’s stock price sell-off along with sustainable growth in financial numbers makes its valuations attractive for new buyers, according to market analysts.

 Johnson & Johnson stock is currently trading around 22 times to earnings compared to the industry average of 25 times. The company’s strategy of offering dividend growth is also among the positive aspects of valuations. It has raised dividends in the past 58 consecutive years.   

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