There's little doubt that companies in the Dow Jones Industrial average appear to defy logic, despite market capitalizations in the hundreds of billions of dollars. Johnson & Johnson
As I mentioned in my opener, I think that current concerns over Procrit, drug-eluting stents, and the DePuy medical device unit are only short-term in nature and are masking what is otherwise a very strong, well-diversified business. In other words, J&J's stock will perform like the stocks of its peers once near-term challenges subside.
In terms of valuation, we're looking at a company that has grown annual earnings and cash flows in the double digits over the past five years. Despite this growth, J&J has experienced significant multiple contraction, as its P/E ratio has dropped from 32 at the end of 2000 to a current 18.
This is not much different than many of the Dow Giants, including Wal-Mart
Fool contributor Ryan Fuhrmann is long shares of J&J, but has no financial interest in any other company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.