Johnson & Johnson (JNJ) vs The Charles Schwab Corporation (SCHW): Which Is the Better Buy in 2026?
As of 2026-11-01, JNJ is overvalued at $273, with a DCF intrinsic value of $203 and a margin of safety of -35%. SCHW is undervalued at $88, with an intrinsic value of $275 and a margin of safety of 68%. Of the two, SCHW has the wider margin of safety.
Rewards
- ★Johnson & Johnson has maintained ROIC above 15% for 4 consecutive years, indicating a durable competitive advantage.
- ★Gross margin of 67.8% indicates strong pricing power — typical of businesses with significant intellectual property or brand strength.
- ★Johnson & Johnson scores 90/100 on the Economic Moat Score (Wide Moat), with revenue predictability as the strongest competitive dimension.
- ★Gross margin of 97.5% indicates strong pricing power — typical of businesses with significant intellectual property or brand strength.
- ★Free cash flow has grown at a 100.6% CAGR over the past 4 years, demonstrating strong earnings power growth.
- ★Each dollar of retained earnings has created $1.89 of earning power — management is creating shareholder value.
Risks
- ⚠FCF yield of 2.8% is below 3%, meaning the market is pricing in substantial future growth to justify the current price.
- ⚠Trailing P/E of 41.5x is 108% above the historical average of 20.0x — the stock trades at a premium to its own history.
- ⚠PEG ratio of 3.07 indicates the stock is expensive relative to its expected growth — the market may be pricing in more growth than analysts project.
- ⚠Altman Z-Score of 0.41 places the company in the distress zone — financial patterns resemble those of companies that experienced bankruptcy.
- ⚠Insiders have sold $3.1M worth of stock in the past 3 months — significant insider liquidation.
Key Valuation Metrics
Learn more →Historical Fundamentals
Learn more →Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
$1 Retained Earnings Test
Learn more →> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
Buffett's "$1 Test": For every $1 of earnings retained, has management created at least $1 of market value?
> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
Discounted Cash Flow (DCF) Analysis
Learn more →Reverse DCF — Market-Implied Growth
Learn more →What growth rate is the market pricing in at $273?
The market implies +9.9% Owner Earnings growth, above historical trends.
Standard FCF implies a demanding +16.1%, reflecting heavy growth investment.
Requires positive FCF to compute implied growth rate.
Economic Moat Score
Learn more →Wide moat with strength across all dimensions. Revenue Predictability is the standout factor.
Narrow moat with reinvestment efficiency as the key competitive advantage. Improving margin stability would strengthen the moat.
Forensic Accounting
Learn more →M-Score Trend
M-Score Trend
Beneish's 8-variable model estimates the probability of earnings manipulation. An M-Score above -1.78 signals elevated risk — companies in this range have historically been 3-5× more likely to be manipulating earnings. Scores between -2.22 and -1.78 fall in a grey zone warranting further investigation.
Ownership Breakdown
Learn more →High insider ownership aligns management incentives with shareholders. Institutional concentration can indicate smart-money conviction but also crowding risk.
Insider Buying Activity
Learn more →Open market purchases · includes direct & indirect ownership · excludes option exercises.
Insider Selling Activity
Learn more →Direct ownership only · excludes indirect, option exercises, planned (10b5-1) sales & derivatives.
🎭 Mr. Market's Mood
Learn more →"Market is optimistic — be cautious and ensure you have a margin of safety"
"Market is pessimistic — investigate whether fears are temporary or structural"
Composite sentiment score based on market signals. Inspired by Buffett’s "Mr. Market" allegory — fear = potential opportunity, greed = potential risk. Must be used alongside fundamental analysis, not in isolation.
⚖️ Buffett Signal
Learn more →The Buffett Signal cross-references market sentiment with DCF valuation. Configure the DCF Analysis above to generate a signal.
The Buffett Signal cross-references market sentiment with DCF valuation. Configure the DCF Analysis above to generate a signal.
Frequently Asked Questions: JNJ vs SCHW
Is Johnson & Johnson or The Charles Schwab Corporation more undervalued in 2026?▼
Based on our discounted cash flow model, SCHW trades at a 68.0% margin of safety (intrinsic value $275 vs. price $88), compared to JNJ's -34.7% margin of safety (intrinsic $203 vs. $273).
Which stock has a wider economic moat, Johnson & Johnson or The Charles Schwab Corporation?▼
JNJ scores 90/100 (Wide moat), while SCHW scores 67/100 (Narrow moat). The moat score measures competitive advantage durability across ROIC consistency, margin stability, revenue predictability, and reinvestment efficiency.
Is The Charles Schwab Corporation in financial distress?▼
SCHW's Altman Z-Score of 0.4 places it in the Distress zone, signaling elevated bankruptcy risk. JNJ scores 3.5 (Safe zone). The Altman Z-Score is a five-factor model that predicts insolvency within two years; scores below 1.81 indicate significant distress.
Which stock has higher return on invested capital, Johnson & Johnson or The Charles Schwab Corporation?▼
JNJ earns 16.0% ROIC versus SCHW's 12.3%. A higher ROIC means the company generates more profit per dollar of capital employed, a hallmark of durable competitive advantage in Buffett-style analysis.
Which dividend is safer, Johnson & Johnson's or The Charles Schwab Corporation's?▼
SCHW's dividend earns a safety score of 88/100 (Very Safe), compared to JNJ's 79/100 (Safe). SCHW has raised its dividend for 1 consecutive years.