Understanding Pricing of a Stock

Understanding the Pricing of a Stock

Stock Performance

Johnson and Johnson Company focuses on the research, development, manufacture, and sale of healthcare products. Being the world’s largest maker of healthcare products, the company enjoys dominance in the stock market. Over the past month (June 2022), the company’s shares returned -5.6% in shares (Nasdaq, 2022). This was contrary to other S&P 500 peers that returned +5.6% and even worse than the industry average (+2.7%) (Nasdaq, 2022). Despite the notable drop in Johnson and Johnson’s stock performance over the recent months, it remains one of the most searched company stocks. The interest in the company’s shares is based on a projection that its shares will gain value in the future.

Investment Decision

One of the tools used when making an investment decision is earnings estimates. Analysts take into account the current business situation when determining these estimates. If the earnings estimates go up, the stock price will also go up. Also, if the stock’s fair value is higher than a company’s current stock price, investors will buy the stock, leading to the price moving upward. Accordingly, I would convince my peers to buy Johnson & Johnson stock since its stock price is likely to increase.

Another basis for purchasing shares is the revenue growth forecast. Estimated earnings may be a superior determinant of a company’s value, but revenue is equally important. After all, it is almost impossible for a company to increase its earnings without increasing its revenue. For Johnson & Johnson, the current consensus sales estimate is $23.67 billion in the current quarter, representing a +1.4% year-over-year change. Also, the $95.12 billion and $99.15 billion estimates for the current and next fiscal year represent a positive movement, implying the purchase of the company’s shares will yield more (Nasdaq, 2022).

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References

Nasdaq. (2022). Is Trending Stock Johnson & Johnson (JNJ) a Buy Now? Nasdaq.com. https://www.nasdaq.com/articles/is-trending-stock-johnson-johnson-jnj-a-buy-now

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JOHNSON & JOHNSON IS THE COMPANY I CHOSE
• Discuss how the stock for your company is trending. Explain why the stock is in either an uptrend or a downtrend.

Understanding Pricing of a Stock

• Convince your peers either to invest in your chosen company or not invest in the company. Explain your reason why.
In your response posts to at least two peers, discuss the following:
• Do you agree with your peer’s argument to either invest or not invest in their company? Explain why or why not. Make sure to include information not previously shared by your peer.