Financial Analysis and Forecasting: JNJ as a Case Study

Cheng-Few Lee () and Wen-Chi Yeh
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Cheng-Few Lee: Rutgers University, USA
Wen-Chi Yeh: Menlo College, USA

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2025, vol. 28, issue 01, 1-57

Abstract: The main purposes of this paper are to show how financial analysis and forecasting can be performed in terms of (i) financial ratio analysis, (ii) policy decision analyses, (iii) beta coefficient, performance measures, and three costs of equity capital, and (iv) simultaneous equation approach to forecast JNJ’s EPS, PPS, and DPS. We first use JNJ’s annual report and price data from Yahoo Finance to calculate financial ratios by using Excel program. Second, we use JNJ, IBM, and S&P 500 monthly returns to calculate beta coefficients, performance measures and cost of equity capital. Third, we use JNJ’s annual report and Yahoo Finance data to forecast EPS, PPS, and DPS in terms of Excel program. In addition, we also use sensitivity analysis to show how growth rate, leverage ratio, and dividend payout ratio can affect the forecast of EPS, PPS, and DPS. There are two potential applications for this paper. First, this paper shows financial analysts how to use accounting data and market rate of return data to determine the fundamental value of individual company and forecast EPS, PPS, and DPS for that company. Second, this paper can also be used by professors of corporate finance and investment analysis to show students how to use real-world financial data to perform financial analysis and forecasting for an individual company.

Keywords: Financial ratios; DOL; DFL; DCL; Z-score; simultaneous equation (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1142/S0219091525500018

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