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Mead Johnson Has a Winning Formula

NEW YORK (TheStreet) -- The first initial public offering after the financial debacle of 2008 was a pioneer that had been part of Bristol-Myers Squibb (BMY).

The inauspicious month of February 2009 saw the market debut of Mead Johnson Nutrition (MJN). By the end of 2009, the stock had gained more than 70%, outperforming its parent.

As its thoughtfully organized Web site informs us, "Mead Johnson Nutrition is a global leader in pediatric nutrition with more than 70 products in over 50 countries. Our Enfa family of brands, including Enfamil infant formula, is the world's leading brand franchise in pediatric nutrition. Our mission is to nourish the world's children for the best start in life."

The company also has developed the Mead Johnson Pediatric Nutrition Institute, with three locations, one each in the U.S., Mexico and China.

As the chart illustrates, since the time of its IPO, MJN has offered its shareholders a return that calls to mind the bromide "A merry heart makes good like a medicine." MJN ChartMJN data by YCharts

The mid-2012 major price correction from the low $80s down to the low $60s presented those who had missed MJN's breathtaking ascent to buy in with sweetened upside potential. As of yesterday, MJN's share price had ranged from a 52-week low of $61.27 to the May 28 high of $86.87.

Since then, the stock has dropped more than 8% and closed yesterday at $79.92. Shares of MJN had been trading at a current price-to-earnings ratio of as high as 28 and a forward P/E of over 22. Its five-year expected price-to-earnings-to-growth ratio had soared to an ebullient level of over 2.3.


Yet, as one shareholder said, "There's not a darn thing wrong with this company, and when the share price drops to below $79 I'm going to buy some more shares." This kind of brand loyalty and confidence in the company is not based on blind love or wishful thinking.

Mead Johnson Nutrition has a portfolio of brands representing specialized products parents have trusted for more than a century. The MJN product line claims that it is designed to "...encourage healthy growth, support brain development and address common feeding issues" of children, not shareholders. Although if what it offers is good for infants, it may be good for us big kids, too.

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