Analysis of Investments
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Johnson & Johnson pages available for free this week:
- Statement of Comprehensive Income
- Analysis of Liquidity Ratios
- Analysis of Solvency Ratios
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value to FCFF (EV/FCFF)
- Price to FCFE (P/FCFE)
- Return on Equity (ROE) since 2005
- Current Ratio since 2005
- Debt to Equity since 2005
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Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities
Johnson & Johnson, adjustment to net earnings
US$ in millions
| 12 months ended: | Dec 29, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net earnings (as reported) | ||||||
| Add: Securities, net change | ||||||
| Net earnings (adjusted) |
Based on: 10-K (reporting date: 2024-12-29), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
The reported and adjusted net earnings of the entity reveal significant fluctuations over the five-year period under review. Both reported and adjusted figures closely align in each year, indicating minimal adjustments between reported and investment-adjusted earnings.
- Trend Analysis
- From 2020 to 2021, net earnings exhibit a strong upward trend, rising from approximately 14.7 billion US dollars to around 20.9 billion US dollars. This represents a notable increase in net earnings within one year.
- In 2022, a downturn is observed with net earnings declining to roughly 17.9 billion US dollars, reflecting a contraction compared to the prior year.
- The year 2023 records a substantial recovery, with net earnings surging to approximately 35.2 billion US dollars. This level doubles the previous year’s earnings, indicating either an exceptional operational year or one-time gains.
- However, in 2024, the net earnings steeply decline again to around 14.1 billion US dollars, nearing the levels observed at the beginning of the period in 2020.
- Insights
- The close alignment between reported and adjusted net earnings suggests consistency in accounting practices and limited impact of special items or non-recurring adjustments on the company’s profitability figures.
- The volatility depicted, particularly the sharp rise in 2023 followed by a significant drop in 2024, could reflect extraordinary events, business cycle effects, or changes in operational performance and market conditions.
- Overall, the data indicates a volatile earnings pattern with pronounced peaks and troughs rather than a stable growth trajectory during the period analyzed.
Adjusted Profitability Ratios: Mark to Market Available-for-sale Securities (Summary)
Johnson & Johnson, adjusted profitability ratios
Based on: 10-K (reporting date: 2024-12-29), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Net Profit Margin Trends
- The net profit margin shows variability over the analyzed periods. Initially, the margin increased from 17.82% in 2020 to a peak of 22.26% in 2021, followed by a decline to approximately 18.9% in 2022. A significant surge occurred in 2023, reaching over 41%, but this was not sustained as the margin fell back to around 15.84% in 2024. The adjusted metrics closely track the reported values, indicating consistency between reported and adjusted figures.
- Return on Equity (ROE) Patterns
- ROE exhibits a similar pattern to net profit margin with an upward trend from 23.25% in 2020 to 28.2% in 2021, then a decline in 2022 to roughly 23.3%. An exceptional increase was observed in 2023, peaking at over 51%, followed by a sharp decrease to just below 20% in 2024. Adjusted ROE figures are nearly identical to reported values, which suggests minimal adjustments affect this ratio.
- Return on Assets (ROA) Movements
- The ROA shows moderate growth from 8.41% in 2020 to 11.47% in 2021, then a reduction to approximately 9.56% in 2022. There is a notable increase in 2023 reaching about 21%, but this improvement declines substantially to around 7.81% in 2024. Adjusted ROA data again closely align with reported values, reflecting consistency in asset performance measures.
- Overall Analysis
- The data reveal cyclical fluctuations with a consistent peak across profitability and efficiency indicators in the year 2023, followed by a marked decrease in 2024. This suggests that 2023 was an exceptionally favorable year with substantially improved returns and margins, while 2024 saw a contraction possibly due to operational or market challenges. The close alignment of reported and adjusted figures throughout the periods underscores reliability and minimal impact of adjustments on core performance metrics.
Johnson & Johnson, Profitability Ratios: Reported vs. Adjusted
Adjusted Net Profit Margin
Based on: 10-K (reporting date: 2024-12-29), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
2024 Calculations
1 Net profit margin = 100 × Net earnings ÷ Sales to customers
= 100 × ÷ =
2 Adjusted net profit margin = 100 × Adjusted net earnings ÷ Sales to customers
= 100 × ÷ =
- Net Earnings Trends
- Reported net earnings showed an overall fluctuating trend over the periods. The earnings increased from US$14,714 million in 2020 to a peak of US$35,153 million in 2023, representing significant growth. However, in 2024, net earnings declined sharply to US$14,066 million, nearly returning to the 2020 level. Adjusted net earnings closely mirrored the reported figures, indicating minimal differences between reported and adjusted values and suggesting consistency in earnings quality.
- Net Profit Margin Trends
- The reported net profit margin exhibited a similar pattern to net earnings. It increased steadily from 17.82% in 2020 to a high of 41.28% in 2023, indicating an improvement in profitability during that period. This rise suggests higher efficiency or profitability in the company’s operations or non-recurring gains in 2023. However, the margin dropped substantially to 15.84% in 2024, the lowest among the years observed, which aligns with the decline in net earnings. The adjusted net profit margin followed the same trajectory and values, reinforcing the reliability of the reported margins.
- Overall Observations
- The data reflects strong profitability growth culminating in 2023, followed by a notable downturn in 2024. The close alignment of reported and adjusted figures indicates stable reporting and adjustments. The large spike in 2023 earnings and margins may suggest exceptional circumstances or one-time gains affecting that fiscal year. The sharp decline in 2024 signals potential challenges or adverse events impacting the company’s financial performance.
Adjusted Return on Equity (ROE)
Based on: 10-K (reporting date: 2024-12-29), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
2024 Calculations
1 ROE = 100 × Net earnings ÷ Shareholders’ equity
= 100 × ÷ =
2 Adjusted ROE = 100 × Adjusted net earnings ÷ Shareholders’ equity
= 100 × ÷ =
- Net Earnings
- The reported net earnings exhibit variability over the five-year span. There is a significant increase from 14,714 million US dollars in 2020 to a peak of 35,153 million in 2023, followed by a sharp decline to 14,066 million in 2024. Adjusted net earnings closely follow the same trend and magnitude, indicating minimal adjustments between reported and adjusted figures.
- Return on Equity (ROE)
- The reported ROE shows a rising trend from 23.25% in 2020, increasing steadily to 28.2% in 2021 before declining to approximately 23.36% in 2022. A pronounced spike to over 51% occurs in 2023, followed by a sharp decrease to about 19.68% in 2024. Adjusted ROE mirrors this pattern almost exactly, confirming the consistency between reported and adjusted returns.
- Overall Financial Performance Insights
- The financial data reveals a period of growth peaking in 2023, with both earnings and ROE reaching historically high levels within the examined timeframe. This peak is succeeded by a notable contraction in 2024, bringing key profitability metrics below those of the initial years. The close alignment of reported and adjusted data suggests stability in accounting adjustments and earnings quality throughout the period.
Adjusted Return on Assets (ROA)
Based on: 10-K (reporting date: 2024-12-29), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
2024 Calculations
1 ROA = 100 × Net earnings ÷ Total assets
= 100 × ÷ =
2 Adjusted ROA = 100 × Adjusted net earnings ÷ Total assets
= 100 × ÷ =
The financial data over the five-year period exhibits distinctive trends in net earnings and return on assets (ROA) for the company.
- Net Earnings
- Both reported and adjusted net earnings closely mirror each other, indicating consistency in the reported and adjusted figures with minimal discrepancies.
- There was a significant increase in net earnings from 2020 to 2021, rising from approximately 14.7 billion US dollars to 20.9 billion US dollars, marking a strong growth phase.
- However, in 2022, net earnings decreased to around 17.9 billion US dollars, showing a downturn after the previous year's peak.
- The year 2023 saw a substantial recovery with net earnings almost doubling compared to 2022, reaching approximately 35.2 billion US dollars, the highest point in the observed period.
- In the latest year, 2024, net earnings sharply declined to about 14.1 billion US dollars, falling below the levels seen in 2020, indicating a significant contraction.
- Return on Assets (ROA)
- The reported and adjusted ROA values are nearly identical each year, suggesting adjustments did not materially affect this profitability measure.
- ROA follows a similar trajectory to net earnings, starting at 8.41% in 2020 and increasing to 11.47% in 2021, reflecting improved asset efficiency.
- There was a decline in 2022 to approximately 9.56%, consistent with the decrease in net earnings during the same period.
- The return on assets surged dramatically in 2023, reaching about 21.0%, which represents a pronounced enhancement in asset utilization and profitability.
- In 2024, ROA dropped back to 7.81%, the lowest point in the five-year span, paralleling the reduction in net earnings and indicating diminished efficiency in asset use.
Overall, the data reveals a highly volatile pattern in both earnings and asset profitability, characterized by strong gains in 2021 and 2023, interrupted by declines in 2022 and a sharp fall in 2024. The close alignment of reported and adjusted figures suggests consistency in financial reporting and adjustments. The exceptionally high net earnings and ROA in 2023 may warrant further examination to understand the underlying factors driving this spike, while the marked downturn in 2024 signals potential challenges requiring attention.