Johnson & Johnson (NYSE:JNJ)

The valuation ratios exhibit a period of significant volatility between 2022 and 2026, characterized by a distinct contraction in multiples during 2023 and 2024 followed by a broad expansion across all metrics toward the end of the observed period.

Price to Earnings (P/E) Ratio

The P/E ratio demonstrated the highest degree of volatility. After remaining stable between 23.0 and 25.0 in 2022, the ratio spiked to 33.43 by April 2023. This was followed by a sharp correction, with the ratio plummeting to a period low of 9.46 in March 2024. A sustained recovery trend emerged thereafter, with the ratio climbing steadily to end at 25.87 in March 2026.

Price to Operating Profit (P/OP) Ratio

The P/OP ratio showed more stability than the P/E ratio. A gradual decline occurred from 21.06 in April 2022 to a low of 15.69 in October 2023. Following this trough, the ratio entered a phase of moderate growth, peaking at 22.95 in December 2025 before settling at 21.40 by the end of the period.

Price to Sales (P/S) Ratio

The P/S ratio remained relatively range-bound between 4.01 and 5.00 from April 2022 through December 2024. However, a notable upward shift occurred in 2025, with the ratio reaching a peak of 6.16 in December 2025, indicating a higher market valuation relative to revenue toward the end of the analysis period.

Price to Book Value (P/BV) Ratio

The P/BV ratio mirrored the trajectory of the P/S ratio. After declining from 6.36 in early 2022 to a minimum of 4.79 in December 2024, the ratio experienced a sharp increase. It peaked at 7.12 in December 2025, suggesting a significant expansion in the market's valuation of the company's equity relative to its book value.

Overall, the data indicates a cyclical pattern where a valuation compression occurring between late 2023 and early 2024 was reversed by a strong expansion phase throughout 2025 and early 2026, particularly evident in the book value and sales multiples.

The valuation metrics for the analyzed period demonstrate significant volatility, characterized by distinct phases of P/E ratio expansion and compression driven by divergent movements in share price and earnings per share (EPS).

Price-to-Earnings (P/E) Ratio Trends

The P/E ratio experienced three distinct cycles. An initial period of stability between April and December 2022 saw the ratio fluctuate between 22.97 and 24.98. A sharp expansion occurred in early 2023, with the ratio peaking at 33.43. This was followed by a period of severe compression between October 2023 and June 2024, where the ratio dropped to a low of 9.46. From September 2024 through March 2026, the ratio trended generally upward, concluding the period at 25.87.

Earnings Per Share (EPS) Dynamics

Fluctuations in EPS acted as the primary catalyst for valuation volatility. A substantial surge in earnings was observed between October 2023 and June 2024, with EPS peaking at 15.99. This spike in profitability caused a dramatic reduction in the P/E ratio despite share price movements. Subsequently, earnings normalized to a range between 8.74 and 11.12 through 2025 and early 2026, which, coupled with rising share prices, led to a gradual increase in the valuation multiple.

Share Price Correlation

The share price followed a U-shaped trajectory over the analyzed timeframe. Prices declined from 180.46 in April 2022 to a trough of 145.60 in October 2023. A strong recovery phase followed, with the price reaching a peak of 240.86 in December 2025 before settling at 226.10 in March 2026. The misalignment between the timing of the share price recovery and the peaks in EPS explains the non-linear movement of the P/E ratio.

The valuation of common stock, as measured by the Price to Operating Profit (P/OP) ratio, exhibited a cyclical trajectory between April 2022 and March 2026. The ratio began at 21.06, experienced a sustained contraction reaching a trough in late 2023, and subsequently underwent a period of expansion that peaked in late 2025 before a slight moderation in early 2026.

Valuation Compression and Trough

A downward trend in the P/OP ratio is observed from April 2022 through October 2023, where the multiple declined from 21.06 to its lowest point of 15.69. This compression occurred despite a general stability in operating profit per share, which remained consistently between 8.53 and 9.28 during this period, suggesting that the decline was primarily driven by a reduction in share price.

Operating Profit Performance

Operating profit per share demonstrated a gradual and steady upward trajectory over the analyzed period. From a baseline of 8.57 in April 2022, the figure rose to 10.56 by March 2026. The most significant growth phase began in June 2025, with profit per share increasing from 8.91 to 10.56 within nine months, providing a stronger fundamental basis for the stock valuation.

Valuation Expansion and Peak

A recovery phase commenced in late 2023, with the P/OP ratio trending upward from 15.69 to a peak of 22.95 in December 2025. This expansion was characterized by a rapid increase in share price, which rose from 157.25 in September 2024 to 240.86 in December 2025. The increase in the multiple during this window indicates an expansion in market valuation that exceeded the rate of growth in operating profits.

Recent Stabilization

As of the final reporting period ending March 29, 2026, a slight correction is noted. The P/OP ratio decreased from its peak of 22.95 to 21.40, corresponding with a reduction in share price to 226.10, while operating profit per share continued its marginal climb to 10.56.

The Price to Sales (P/S) ratio exhibits a cyclical trajectory characterized by an initial period of compression, a phase of stabilization, and a subsequent sharp expansion in valuation.

P/S Ratio Trend Analysis

A downward trend in the P/S ratio is observed from April 2022 to October 2023, with the ratio declining from 5.00 to a period low of 4.01. This contraction indicates a decrease in the market premium attributed to each dollar of revenue. Following this trough, the ratio entered a stabilization phase between December 2023 and March 2025, fluctuating within a narrow range between 4.19 and 4.55.

A significant valuation expansion occurred throughout 2025, where the ratio climbed to a peak of 6.16 in December 2025. This represents the highest valuation multiple in the analyzed period, followed by a moderate correction to 5.65 by March 2026.

Relationship Between Share Price and Sales per Share

The volatility of the P/S ratio is primarily driven by fluctuations in the share price rather than variances in revenue. Sales per share remained relatively stable, showing a gradual and consistent increase from 34.59 in July 2023 to 40.03 in March 2026.

Conversely, the share price experienced substantial volatility, dropping to 145.60 in October 2023 before surging to a peak of 240.86 in December 2025. The divergence between the steady growth of sales per share and the aggressive growth of the share price in late 2025 accounts for the rapid increase in the P/S ratio during that interval.

Valuation Insights

The data indicates that the market's willingness to pay a premium for sales shifted significantly over the period. The transition from a P/S of 4.01 in late 2023 to 6.16 in late 2025 suggests a substantial increase in investor confidence or a shift in market expectations regarding future growth and profitability that exceeded the actual growth rate of sales.

The valuation of the common stock relative to its book value exhibits a cyclical pattern characterized by a period of compression followed by a significant expansion. The Price to Book Value (P/BV) ratio fluctuated between a low of 4.79 and a peak of 7.12 over the observed timeframe, reflecting shifts in market pricing that outpaced the growth of the underlying book value.

P/BV Ratio Trend Analysis

A downward trend in the P/BV ratio is observed from April 2022 through October 2023, where the ratio declined from 6.36 to 4.92. This contraction suggests a period of market devaluation or a reduction in the premium investors were willing to pay over the accounting value of the assets. Following this trough, the ratio remained relatively stable between 4.79 and 5.69 throughout 2024, before experiencing a sharp ascent in late 2025, reaching a maximum of 7.12 in December 2025.

Book Value per Share (BVPS) Performance

The BVPS demonstrated relative stability for the majority of the period, oscillating within a narrow range between 27.27 and 29.72 US$ from early 2022 through late 2024. A distinct upward shift occurred starting in December 2024, with BVPS increasing to 32.46 and continuing a gradual climb to 33.73 by March 2026. This indicates a strengthening of the company's net asset position per share toward the end of the analyzed period.

Share Price Influence on Valuation

The volatility in the P/BV ratio is primarily driven by share price movements rather than changes in book value. A significant valuation spike is evident between June 2025 and December 2025, as the share price rose from 169.56 to 240.86 US$. This rapid appreciation caused the P/BV ratio to climb from 5.20 to 7.12, representing the highest valuation premium in the series. The final period shows a slight correction, with the ratio settling at 6.70 as the share price moderated to 226.10 US$.