Johnson & Johnson (JNJ) is considered a better investment choice over AbbVie (ABBV) due to its superior revenue growth and profitability in recent years. Despite AbbVie trading at a higher valuation of 5.5x trailing revenues compared to 4.6x for JNJ, experts predict that this valuation gap will narrow in favor of JNJ over the next few years. In comparing historical revenue growth, returns, and valuation, JNJ is expected to outperform ABBV in the coming years.
When comparing stock returns, ABBV has seen strong gains of 60% since early 2021, while JNJ has had little change in its stock price. Both stocks have underperformed the S&P 500 in recent years, but JNJ is expected to fare better than ABBV over the next three years. Investing in individual stocks has become challenging in recent years, but the Trefis High Quality Portfolio has consistently outperformed the S&P 500, providing better returns with less risk.
JNJ’s revenue growth has outperformed ABBV, with a 8.2% increase in sales since 2021 compared to a 3.3% decline for AbbVie. Key growth drivers for JNJ include the multiple myeloma treatment Darzalex and the autoimmune drug Stelara, while AbbVie relies heavily on its blockbuster drug Humira, which faces biosimilar competition. Despite this, AbbVie is looking to combat revenue losses with market share gains for newer drugs and recent acquisitions.
In terms of profitability, JNJ has a better operating margin compared to AbbVie. JNJ’s operating margin of 26.6% is higher than AbbVie’s 24.9%, and JNJ also has a lower debt to equity ratio and higher cash as a percentage of assets. Based on these factors and JNJ’s lower valuation multiples compared to its historical averages, experts believe JNJ is the better choice between the two pharmaceutical companies.
While JNJ is expected to outperform ABBV in the next three years, it is important to consider how JNJ’s peers fare on important metrics. Comparing companies across industries can provide valuable insights for investors. Overall, JNJ’s superior revenue growth, profitability, and attractive valuation make it a better pick compared to AbbVie for potential investors looking to invest in the pharmaceutical sector.
