NEW YORK (TheStreet) -- As much as I have liked health care giant Johnson & Johnson (JNJ), I think the company has reached the point where it no longer deserves the benefit of the doubt that it continues to receive.
Rivals such as Pfizer (PFE), Novartis (NVS) and Covidien (COV) now appear more nimble and adaptable, but Johnson & Johnson comes across as incredibly stubborn for being unwilling to concede that it should break itself up.
Its insistence upon remaining one entity is remarkable when rivals such as Abbott Labs (ABT) and Pfizer have enjoyed positive results from opting to separate their businesses.
What's more, Johnson & Johnson has made some recent mistakes, including product recalls, and until recently its stock performance has been broadly uninspiring.And in terms of valuation, there are considerably better options available within the sector. In my mind, Johnson & Johnson's current price-to-earnings ratio of 18.8 isn't justified by the company's current growth. Meanwhile, Pfizer and Novartis have lower P/Es. These two rivals offer gross and operating margins that are either similar to or better than Johnson & Johnson's. The stumbles that JNJ has suffered over the past five years lend support to those that call for its breaking up into smaller parts. But in disappointing fashion, the company's management continues with its attitude of "we know best." Will this insistence cause the company to lose some loyal investors for good? As much as I appreciate a good turnaround story, JNJ does not yet fit the criteria absent its removal of the "too big to succeed" overhang. For as dominant as it has been over the past several decades, it needs to embrace that 2.2% revenue growth is all that analysts are projecting. When has that ever been enough? It's hard to imagine any other company today that has shown more evidence of resting on its laurels. Follow @rsaintvilus At the time of publication, the author had no positions in stocks mentioned. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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