we believe Medtronic shares (NYSE: MDT) is currently a better choice than Johnson & Johnson Shares (NYSE: JNJ), given its better prospects. Although Medtronic
MDT
 Trading at a relatively low valuation of 3.5 times excess revenue versus J&J’s 4.5 times this valuation gap is largely justified given J&J’s superior profitability and low financial risk, as shown below.

If we look at stock returns, JNJ, with a 3% drop this year, has been better off with a 20% drop for MDT stock and -23% returns for the broader S&P 500. JNJ’s outperformance can be attributed in part to its recently announced $5 billion share buyback plan, reaffirming full-year earnings expectations of $10.70 in the mid-range. There’s more to the comparison, and in the sections below, we discuss why we think MDT stocks will provide better returns than JNJ stocks in the next three years. We compare a large number of factors such as historical revenue and revenue growth and multiple evaluation in an interactive dashboard analysis Medtronic vs. Medtronic. Johnson & Johnson

JNJ
: Which stock is better? Parts of the analysis are summarized below.

1. Better J&J revenue growth

  • J&J’s 7.2% revenue growth over the past 12 months is much better than -1.7% for Medtronic.
  • Even looking at a longer time frame, J&J’s sales growth was better. It increased at an average annual growth rate of 4.9% to $93.8 billion in 2021, compared to $81.6 billion in 2018, while Medtronic saw its revenue rise at an average annual rate of just 1.3% to $31.7 billion in the fiscal year. 2022 (Medtronic Financial expires in 2022). April), compared to $30.0 billion in 2018.
  • While J&J’s medical device business faced headwinds in 2020 due to the impact of the pandemic, it rebounded in 2021.
  • The pharmaceutical sector saw a 14% increase in sales in 2021, and sales of the medical devices sector increased by 18%. The strong performance of both sectors is expected to continue in the future.
  • The company’s pharmaceutical business is experiencing strong growth, led by market share gains for its cancer drugs, Imbruvica and Darzalex, and the immunotherapy drugs Stelara and Tremfya.
  • Medtronic’s sales have also been hit during the pandemic due to the postponement of elective surgeries. The emergence of new Covid-19 variants, including Delta and Omicron, has affected the demand recovery.
  • There are high hopes for Medtronic’s most advanced insulin pump system – the MiniMed 780G – to drive diabetes sales in the future. The product has not yet been approved in the United States. The poor stock MDT performance mentioned earlier in this article can be linked to concerns about delays in approval of the MiniMed 780G. Late last year, the US Food and Drug Administration (FDA) issued a warning to the Medtronic Diabetes Business Facility in California, citing deficiencies in quality system requirements.
  • our Medtronic Inc. Revenue And the Johnson & Johnson revenue Dashboards provide more information about corporate sales.
  • Looking ahead, J&J’s revenue is expected to grow faster than Medtronic over the next three years. The table below summarizes our revenue forecasts for the two companies over the next three years. It indicates a 1.6% compound annual growth rate for Medtronic, compared to a 3.6% compound annual growth rate for J&J, based on a Trefis Machine Learning analysis.
  • Note that we have different methodologies for companies that are negatively affected by Covid and those that are not or positively affected by Covid while forecasting future revenue. For companies that have been adversely affected by Covid, we are considering a quarterly revenue recovery trajectory to forecast a recovery to the pre-Covid revenue run rate. After the recovery point, we apply the average annual growth observed three years before Covid to simulate a return to normal conditions. For companies that recorded positive revenue growth during Covid, we consider pre-Covid average annual growth with a certain weight to growth during Covid and the past 12 months.

2. J&J is more profitable, and comes with less risk

  • J&J’s operating margin of 23.9% over the past 12-month period is slightly better than Medtronic’s 19.9%.
  • This compares with 24.5% and 25.2% in 2019, before the pandemic, respectively.
  • J&J’s free cash flow margin of 24.7% is also better than Medtronic’s 23.0%.
  • our Medtronic operating income And the Johnson & Johnson operating income Dashboards contain more details.
  • Given the financial risks, J&J rates are better. Its 15.5% debt as a percentage of equity is lower than Medtronic’s 21.2%, while its 13.3% cash as percentage of assets is above 9.9% for the latter, meaning J&J has a better debt position and more cash.

3. Network everything

  • We see that J&J has demonstrated better revenue growth, is more profitable, has a better debt position, and has more cash flow. On the other hand, Medtronic is available at a relatively lower valuation.
  • By historical performance, J&J appears to be the clear winner between the two. But will it continue to outperform in the coming years? We don’t think so.
  • Given the prospects, using P/S as a base, due to the high volatility of P/E and P/EBIT, we believe Medtronic is currently the better choice of the two.
  • The table below summarizes Medtronic and J&J’s revenue and revenue forecasts over the next three years and indicates an expected 14% return for Medtronic over this period versus an 8% expected return for J&J, based on a Trefis Machine Learning analysis – Medtronic vs. Medtronic. Johnson & Johnson – which also provides more details on how we arrived at these numbers.

While MDT stock seems like a better pick for JNJ stock, it's helpful to know how Medtronic Peers Fare on important metrics. You'll find other valuable comparisons of companies across industries at Peer comparisons.

Moreover, the Covid-19 crisis has caused many price pauses, which can provide attractive business opportunities. For example, you will be surprised how counterintuitive the stock valuation is UnitedHealth Group vs. Pool Corporation.

Due to rising inflation and the Federal Reserve raising interest rates, among other factors, MDT stock has fallen 20% this year. Could you fall over here? Find out how low Medtronic's stock is by comparing its decline in previous market incidents. Below is a summary of the performance of all stocks in previous market crashes.

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