Johnson & Johnson (JNJ) vs Transdigm Group Incorporated (TDG): Which Is the Better Buy in 2026?
As of 2026-08-03, JNJ is fairly valued at $256, with a DCF intrinsic value of $283 and a margin of safety of 9%. TDG is undervalued at $1254, with an intrinsic value of $55112971143 and a margin of safety of 100%. Of the two, TDG 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 68.1% 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.
- ★Transdigm Group Incorporated has maintained ROIC above 10% for 4 consecutive years, suggesting solid business economics.
- ★Transdigm Group Incorporated scores 94/100 on the Economic Moat Score (Wide Moat), with margin stability as the strongest competitive dimension.
- ★Free cash flow has grown at a 29.9% CAGR over the past 4 years, demonstrating strong earnings power growth.
Risks
- ⚠FCF yield of 2.7% is below 3%, meaning the market is pricing in substantial future growth to justify the current price.
- ⚠Trailing P/E of 29.8x is 49% above the historical average of 20.0x — the stock trades at a premium to its own history.
- ⚠PEG ratio of 4.23 indicates the stock is expensive relative to its expected growth — the market may be pricing in more growth than analysts project.
- ⚠PEG ratio of 3.05 indicates the stock is expensive relative to its expected growth — the market may be pricing in more growth than analysts project.
- ⚠Net debt/EBITDA of 5.8x indicates heavy leverage — it would take over 4 years of EBITDA to pay off net debt.
- ⚠Altman Z-Score of 0.59 places the company in the distress zone — financial patterns resemble those of companies that experienced bankruptcy.
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 $256?
The market implies +9.1% Owner Earnings growth, above historical trends.
Standard FCF implies a demanding +16.5%, reflecting heavy growth investment.
What growth rate is the market pricing in at $1254?
The market implies +1.4% Owner Earnings growth, below historical trends — potential opportunity.
Standard FCF implies a more demanding +6.6%, reflecting heavy growth investment expected to generate future returns.
Economic Moat Score
Learn more →Wide moat with strength across all dimensions. Revenue Predictability is the standout factor.
Wide moat with strength across all dimensions. Margin Stability is the standout factor.
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 pricing this stock without strong emotion in either direction"
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 TDG
Is Johnson & Johnson or Transdigm Group Incorporated more undervalued in 2026?▼
Based on our discounted cash flow model, TDG trades at a 100.0% margin of safety (intrinsic value $55112971143 vs. price $1254), compared to JNJ's 9.4% margin of safety (intrinsic $283 vs. $256).
Which stock has a wider economic moat, Johnson & Johnson or Transdigm Group Incorporated?▼
TDG scores 94/100 (Wide moat), while JNJ scores 90/100 (Wide moat). The moat score measures competitive advantage durability across ROIC consistency, margin stability, revenue predictability, and reinvestment efficiency.
Is Transdigm Group Incorporated in financial distress?▼
TDG's Altman Z-Score of 0.6 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 Transdigm Group Incorporated?▼
JNJ earns 16.9% ROIC versus TDG's 10.9%. 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 Transdigm Group Incorporated's?▼
JNJ's dividend earns a safety score of 79/100 (Safe), compared to TDG's 21/100 (Unsafe). JNJ has raised its dividend for 3 consecutive years.