Johnson Controls International plc (JCI) Stock Analysis
Johnson Controls International plc (JCI) Stock Analysis
Overall Grade: F (Concerning)
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Johnson Controls International plc faces challenges in financial performance that warrant careful analysis.
Key Metrics:
| Metric | Value | Context |
|---|---|---|
| ROIC | 10.3% | Near cost of capital |
| FCF Margin | -1.8% | Cash flow pressure |
| Debt/Equity | 0.7x | Moderate leverage |
Investment Thesis: Financial metrics indicate concerning business quality with areas requiring attention.
What is Johnson Controls International plc's Profitability and ROIC?
Johnson Controls International plc's return on invested capital of 10.3% is around industry norms. Gross margin of 36.4% with operating margin at 12.0% reflects the company's moderate market position.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 10.3% | Adequate | Adequate returns |
| Return on Equity (ROE) | 21.2% | Excellent | Efficient use of shareholder equity |
| Gross Margin | 36.4% | Good | Competitive pricing environment |
| Operating Margin | 12.0% | Good | Moderate operational efficiency |
How Strong is Johnson Controls International plc's Cash Flow Quality?
Johnson Controls International plc generated $-434.0M in free cash flow over the trailing twelve months, representing a -1.8% margin. FCF was positive in N/A of the last 8 quarters, indicating variable cash generation.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Free Cash Flow Margin | -1.8% | Red flag | Thin cash margins |
| Free Cash Flow (TTM) | $-434.0M | Red flag | Cash burn |
| FCF Consistency (8Q) | N/A | Warning | Variable cash flow |
What is Johnson Controls International plc's Financial Health?
Johnson Controls International plc's debt-to-equity ratio of 0.7x indicates moderate leverage.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Debt to Equity | 0.7x | Adequate | Moderate leverage |
| Net Cash Position | $-8.9B | Warning | Net debt position |
Is Johnson Controls International plc Stock Overvalued or Undervalued?
Johnson Controls International plc trades at a P/E of 21.8x, representing a premium to the sector median of N/A. Free cash flow yield of -0.6% reflects market expectations for growth.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| P/E Ratio | 21.8x | Adequate | Premium valuation |
| EV/Sales | 1.0x | Excellent | Attractive revenue multiple |
| FCF Yield | -0.6% | Warning | Lower cash yield |
| Dividend Yield | 1.4% | Adequate | Growth focus over income |
Sector Rankings
| Metric | Value | Percentile | vs Median |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 10.3% | Top 50% | 1.3x above |
| Free Cash Flow Margin | -1.8% | Bottom 10% | -0.3x below |
| Gross Margin | 36.4% | Top 50% | 1.1x above |
| Operating Margin | 12.0% | Top 50% | 1.5x above |
| Return on Equity (ROE) | 21.2% | Top 25% | 2.4x above |
| P/E Ratio | 21.8x | N/A | - |
Rating Thresholds
Return on Invested Capital (ROIC)
Measures how efficiently a company uses its debt and equity capital to generate profits. ROIC above 15% typically indicates a competitive moat.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Exceptional capital efficiency, strong competitive moat |
| Good | 12% - 20% | Above-average returns, sustainable competitive position |
| Adequate | 8% - 12% | Around cost of capital, moderate competitive position |
| Warning | 4% - 8% | Below cost of capital, value may be eroding |
| Red flag | < 4% | Significant capital destruction, fundamental issues |
Current: 10.3% (Adequate - Top 50% of sector (median: 8.0%))
Free Cash Flow Margin
The percentage of revenue converted to free cash flow. Higher margins indicate stronger cash generation and business quality.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Strong cash generation, high-quality business |
| Good | 10% - 20% | Healthy cash conversion |
| Adequate | 5% - 10% | Moderate cash generation |
| Warning | 0% - 5% | Thin cash margins, capital intensive |
| Red flag | < 0% | Cash burn, potential liquidity concerns |
Current: -1.8% (Red flag)
Gross Margin
Revenue minus cost of goods sold as a percentage. Higher gross margins indicate pricing power and competitive advantage.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 50% | Strong pricing power and competitive moat |
| Good | 30% - 50% | Healthy margins, differentiated product |
| Adequate | 20% - 30% | Moderate margins, competitive industry |
| Warning | 10% - 20% | Thin margins, commodity-like business |
| Red flag | < 10% | Very thin margins, structural challenges |
Current: 36.4% (Good - Top 50% of sector (median: 33.4%))
Debt to Equity Ratio
Total debt divided by shareholders' equity. Lower ratios indicate more conservative financing and reduced financial risk.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 0.3x | Conservative leverage, strong balance sheet |
| Good | 0.3x - 0.7x | Moderate leverage, healthy financial position |
| Adequate | 0.7x - 1.5x | Elevated leverage, monitor closely |
| Warning | 1.5x - 3.0x | High leverage, increased financial risk |
| Red flag | > 3.0x | Excessive leverage, potential distress risk |
Current: 72.1% (Adequate)
P/E Ratio (Price-to-Earnings)
Stock price divided by earnings per share. Lower P/E may indicate undervaluation, while higher P/E suggests growth expectations.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 15x | Attractively valued, potential opportunity |
| Good | 15x - 25x | Fair value for quality company |
| Adequate | 25x - 35x | Growth premium, justify with earnings growth |
| Warning | 35x - 50x | High expectations priced in |
| Red flag | > 50x or negative | Speculative valuation or losses |
Current: 21.8x (Adequate)
Free Cash Flow Yield
Free cash flow per share divided by stock price. Higher FCF yield indicates better cash return relative to valuation.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 8% | High cash return, potential value opportunity |
| Good | 5% - 8% | Solid cash yield |
| Adequate | 3% - 5% | Moderate cash return |
| Warning | 1% - 3% | Low cash yield, growth expectations |
| Red flag | < 1% | Minimal cash return to shareholders |
Current: -0.6% (Red flag)
Frequently Asked Questions
Q: What is Johnson Controls International plc's Return on Invested Capital (ROIC)?
Johnson Controls International plc (JCI) has a trailing twelve-month Return on Invested Capital (ROIC) of 10.3%. This compares above the sector median of 8.0%. An ROIC near 8-12% is approximately the cost of capital for most companies.
Q: What is Johnson Controls International plc's Free Cash Flow Margin?
Johnson Controls International plc (JCI) has a free cash flow margin of -1.8%, generating $-434.0 million in free cash flow over the trailing twelve months. Negative free cash flow means the company is consuming cash, which may require financing.
Q: Is Johnson Controls International plc stock overvalued or undervalued?
Johnson Controls International plc (JCI) trades at a P/E ratio of 21.8x, which is above the sector median of N/A. The EV/Sales multiple is 1.0x.
Q: Does Johnson Controls International plc pay a dividend?
Johnson Controls International plc (JCI) currently pays a dividend yield of 1.4%. Including share buybacks, the total shareholder yield is 9.7%. The relatively low yield suggests the company prioritizes growth reinvestment over income distribution.
Q: How much debt does Johnson Controls International plc have?
Johnson Controls International plc (JCI) has a debt-to-equity ratio of 0.7x with total debt of $9.3 billion. Net debt position is $8.9 billion.
Q: What is Johnson Controls International plc's revenue and earnings growth?
Johnson Controls International plc (JCI) grew revenue by 2.8% year-over-year. Earnings per share increased by 98.8% compared to the prior year. Modest growth indicates a mature business with stable demand.
Q: Is Johnson Controls International plc buying back stock?
Johnson Controls International plc (JCI) repurchased $6.0 billion of stock over the trailing twelve months. This represents a buyback yield of 8.4%.
Q: How does Johnson Controls International plc compare to competitors in Industrials?
Compared to other companies in Industrials, Johnson Controls International plc (JCI) shows: ROIC of 10.3% is above the sector median of 8.0% (Top 41%). FCF margin of -1.8% trails the sector median of 5.4%. Gross margin at 36.4% is 3.1 percentage points higher than sector peers. These rankings are based on MetricDuck's analysis of all Industrials companies with available SEC filings.
Q: What warning signs should I watch for with Johnson Controls International plc?
Investors in Johnson Controls International plc (JCI) should monitor these potential warning signs: 1) FCF margin is thin at -1.8%, leaving limited buffer for economic downturns. Regular monitoring of SEC filings and quarterly trends is recommended.
Data Source: Data sourced from 10-K filed 2025-11-14. TTM metrics as of Q3 2025.
Methodology: Financial metrics calculated from SEC 10-K and 10-Q filings using standardized formulas. Sector comparisons use peer group based on SIC code.
This analysis is for informational purposes only and does not constitute investment advice.