By applying different what-if scenarios to Johnson & Johnson (JNJ), I arrived at a conclusion that a fair value would be more likely in the 70$ level. This provides a 45% downside.
Before we can apply any valuation metrics to Johnson & Johnson, we need three inputs to start with. These are normalized return on equity (RoE), free cash flow (FCF) and long-term revenue growth. As market expectations are usually way too optimistic (see this for example), I place little relevance on them. The same thing can be said about what management is targeting in the long term. This is why I place more weight on how the company has managed to perform in recent years.
