Johnson & Johnson (JNJ) vs Xylem Inc. (XYL)
Rewards
- ★Johnson & Johnson has maintained ROIC above 10% for 4 consecutive years, suggesting solid business economics.
- ★Gross margin of 68.0% 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.
- ★Free cash flow has grown at a 32.9% CAGR over the past 4 years, demonstrating strong earnings power growth.
- ★Each dollar of retained earnings has created $4.72 of earning power — management is an exceptional capital allocator.
- ★Trailing P/E of 28.8x is 29% below the historical average of 40.8x — potentially undervalued relative to its own history.
Risks
- ⚠Trailing P/E of 26.3x is 32% above the historical average of 20.0x — the stock trades at a premium to its own history.
- ⚠PEG ratio of 2.95 indicates the stock is expensive relative to its expected growth — the market may be pricing in more growth than analysts project.
- ⚠7 insider sales totaling $58.4M with no purchases in the past 3 months — insiders are reducing their exposure.
- ⚠Share count has increased by 35% over the past 4 years, diluting existing shareholders.
- ⚠Despite buyback spending, shares outstanding increased in 3 out of 4 years — stock-based compensation is offsetting repurchases.
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.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation.
$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 $227?
The market implies +8.8% Owner Earnings growth, below historical trends — potential opportunity.
Standard FCF implies a more demanding +13.2%, reflecting heavy growth investment expected to generate future returns.
What growth rate is the market pricing in at $115?
The market implies +13.2% Owner Earnings growth, below historical trends — potential opportunity.
Standard FCF implies a more demanding +13.2%, 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.
Narrow moat with reinvestment efficiency as the key competitive advantage. Improving roic consistency 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 pricing this stock without strong emotion in either direction"
"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.