Johnson & Johnson

DCF against market -52.7% (tolerance 15.0%). the discount rate: Valuation / WACC / WACC, 9.22 per cent from the common yardstick (beta 1, cost of equity 9.40 per cent): the DCF's equity value over the market capitalisation, less one: 53 per cent below, beyond the tolerance. The assumption that causes it is the discount rate, the WACC of 9.22 per cent from the common yardstick (beta 1, cost of equity 9.40 per cent): the market's enterprise value implies a steady-state WACC of about 6.3 per cent at the model's 3.5 per cent growth, at which the gap closes; JNJ's own regressions read a beta of 0.19 to 0.21 (R2 0.03). Beside the record, the price implies residual operating income growing about 7.6 per cent a year forever after FY2036, where sales grew 4.6 per cent

Residual income against market -51.0% (tolerance 15.0%). the discount rate: Valuation / WACC / WACC, 9.22 per cent from the common yardstick (beta 1, cost of equity 9.40 per cent): the residual-income equity value over the market capitalisation, less one: 51 per cent below, for the same cause as the DCF's gap, the 9.22 per cent WACC against the market-implied 6.3 per cent; residual income sits 3.5 per cent above the DCF on the same forecast, so the forecast and the rate, not the method, carry the gap, and its residual operating income would have to grow about 7.6 per cent a year forever after FY2036 to reach the price