Company Name ticker

JOHNSON & JOHNSON JNJ

2/16/2009 all figures in $Mil

Company Assessment: Quantitative

Valuation Criteria over 10yrs Value Points User Points

> 25% or 50% depending on
DCF Valuation Discount 30% 0
moat
Graham Intrinsic Value Discount > 66% 54% 0

Margins, Profit and Growth Criteria over 10yrs Value Points User Points
Median Revenue growth 10% 11.3% 1
Median Gross Margin 30% 71.2% 1
Median Operating Margin 15% 25.0% 1
Median Net Margin 10% 17.6% 1
Median EPS growth 10% 13.9% 1

Business and Management Performance Criteria over 10yrs Value Points User Points
Cash growth from Operations 15% 13.4% 0
CROIC is postive and capable of paying off financing 13% 28.4% 2
Median FCF growth positive and consistent 10% 14.6% 1
Median FCF/Sales 7% 16.7% 2
Consistent ROE (manually check) Consistent over 10yrs N/A N/A
Consistent ROA (manually check) Consistent over 10yrs N/A N/A

Balance Sheet Criteria for TTM Value Points User Points

Current assets > 1.5 x current liabilities > 1.5 x current liabilities 1.5 1
Price to Book ratio < 2 N/A 3.84 N/A N/A
Debt to Equity < 100% 86.9% 1
FCF to Debt > 10% 27.7% 1
Capitalization Ratio < 30% 14% 1
Intangibles % of assets < 15% of assets 32.6% 0
 Company Assessment: Qualitative

Johnson & Johnson is engaged in the research and development, manufacture and sale of a range of products in the healthcare
field. Johnson & Johnson has more than 250 operating companies. The Company operates in three segments: Consumer,
Pharmaceutical, and Medical Devices and Diagnostics. Sales of the Company's two largest products, RISPERDAL and REMICADE,
accounted for approximately 6% and 5% of Johnson & Johnson�s total revenues, respectively, during the fiscal year ended
December 30, 2007 (fiscal 2007). During fiscal 2007, the Company acquired three companies: Conor Medsystems, Inc., which is a
cardiovascular device company, with new drug delivery technology; Robert Reid, Inc., which is a Japanese orthopedic product
distributor, and Maya�s Mom, Inc., which is a social media company. In October 2008, the Company acquired HealthMedia, Inc. In
December 2008, Johnson & Johnson acquired Omrix Biopharmaceuticals, Inc.

Competitive Advantage Comment User Points Max Points

Stable market share? 2 max 2
Dominant company in industry, segment? 2 max 2
Low barriers to entry and exit? 1 max 2
Experience goods (brand effect, trademarks) 2 max 2
High switching costs? 0 max 2
Network effect? E.g. eBay 2 max 2

Business Model Comment User Points Max Points

Growth due to:
a) No
a) existing product / existing market (yes/no)
b) Yes
b) existing product / new market (yes/no) 1 max 2
c) No
c) new product / existing market (yes/no)
d) Yes
d) new product / new market (yes/no)

Able to increase prices and retain customers? 1 max 1

Compete on price? (1 for no, 0 for yes) 1 max 1
Barriers of entry to the business? 0 max 1
Diverse customers? (1 for diverse, 0 for concentrated) 1 max 1
Involved in competition? Monopoly, duopoly, crowded 2 max 2
Company has a recurring revenue stream? 1 max 1
Capital intensive company? 0 max 1

Management Comment User Points Max Points

High insider ownership? 1 max 1
Candid management on positives and negatives? 1 max 1
Management performance at previous jobs? 1 max 1
Compensation levels compared to sales? 1 max 1

Industry Comment User Points Max Points

Boring industry? (1 for slow, 0 for fast industry) 1 max 1
Can company adapt to changing industry environment? 1 max 1
Industry leader or lagger? (1 for leader, 0 for lagger) 1 max 1

Psychological Factors to Consider. Not Weighted. Comment

Recency bias?
Hindsight bias?
Framing issues correctly and in different manners?
Is there a data framing bias?
Am I too overconfident on the situation?
Performed probability analysis for -ve factors?
Too much loss aversion?
Sunk cost mentality?
Slow in changing opinion?
Psychological denial ?
Bias from commitment and consistency tendency?
Pavlovian association?
Social proof bias?
Status quo bias?
False consensus bais?
Category Total Points out of 5
Valuation 0.0
Margins, Profit and Growth 5.0
Business and Management Performance 2.5
Balance Sheet 4.0
Competitive Advantage 3.8
Business Model 3.5
Management 5.0

Low Risk High Growth Under Valued Well Managed Good Financial Health Strong Moat
3.0 3.0 3.0 4.3 4.0 3.8
3.0 3.0

JNJ Low Risk

5.0
4.0
3.0
Strong Moat High Growth
2.0
1.0
0.0

Good Financial Health Under Valued

Well Managed