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No. of Recommendations: 0
First of all, I wouldn't worry about the low ranker score. JNJ gets a significant percentage of their sales from lower margin consumer products and medical devices, hurting its monopoly score. It wasn't a fair comparison. Sales growth was also hurt by propulsid sales which I think was taken off the market in the US.

>> For my assumptions: I used a 10% growth rate for years 1-10 for JNJ.
That is below its current "long term growth rate" that can be found on the
estimates page, but I think it is reasonable. <<

10% seems reasonable(though a little on the low side) to me. You are counting all its earnings as dividends, so you will have to use a lower than estimated growth rate. But I actually think that 5 years from now, JNJ's growth rate will be higher than it is today, for a few reasons:

1)Its higher-growth pharmaceuticals division is becoming an ever-greater percentage of JNJ's profits.

2)JNJ does not have a great pipeline, hence it's growth projection of only 13% growth for the next 5 years. But its pharmaceutical division is investing 16% of sales into R&D, which should pay off in the future.

3)JNJ aquired Centocor, a major biotech company. Centocor is already selling products, and in a few years, should improve JNJ's earnings growth.

>> I used a discount rate of 9%, figuring that JNJ as a
mature company faces some of the same risks as Coke, and Bill used 9% <<
There are actually several ways of discounting. The first is to use a low discount rate and add a margin of safety. For instance, you might use the risk-free bond rate as your discount rate and have a margin of safety of 70%, meaning you'd only buy the stock if it fell to 30% of your intrinsic value. The second method is to use the desired rate of return as your discount rate, i.e. if you want a 12% annual return on JNJ, 12% would be your discount rate.
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