While Scandium and I vociferously disagree on some things (see my thread on why some sophisticated investors shouldn't index), I agree with him or her here that the efficient market hypothesis should be starting point for your analysis. You won't get good results by doing very superficial analysis that is only a few ratios.
The ABSOLUTE minimum (and that's really pushing it) you should do is the level of analysis that Jason Fieber on Dividend Mantra does. That's an example of an individual investor who does somewhat adequate research on blue-chip dividend-paying stocks. If you can't meet or exceed (hopefully exceed by far) the amount of analysis he does you shouldn't be buying individual stocks. Investing is very qualitative not just quantitative. If it was only quantitative it truly would be completely efficient.
I don't think that it has to be or even should be an all or nothing proposition all individual stock vs all index. For a new young investor you should max out your 401K/tax deferred, establish you emergency fun, save for down payment.... Let say after that being a good Mustachian you still have $10,000 or maybe even 20,000 left over take half or 75% and stick it in index funds. If that still leaves you with $2,000 to $5,000 to buy 1-3 individual stocks a year. I think there is much to recommend doing so.
At the end of the day, it doesn't really matter if the OP buys JNJ or PG. I'm not a big fan of the efficient market theory, but even I will concede that is most likely to apply to to mega blue chip like JNJ or PG. It is very unlikely that JNJ will double in price in the next 3 years, while P&G gets cut in 1/2 or vice versa. (baring some unforseen event like they poison their customers). More likely one will go up 20% and the other 25%$ or 30% and on $2,000 purchase that's a $100 or $200 hardly material in the big picture. I think there is a limit to what you can learn about stock investing without actually getting your feet wet and buying stocks.
I think there several reasons to encourage people who are interested to buy individual stocks with a portion of their investment money
A. Increased saving. I think for many of us it is easier to not buy a toy, or an expensive vacation if we are using the money to buy ownership in an individual company (i.e. stock) than a dull mutual fund.
B. Greater psychological rewards. If I buy 100 shares of A at $25, B at $35, and C $40 and at the end of the year the A is $45, B is $30, and D is $35. I get real excited about my brilliant purchase of A. I'll sell B and C and get my tax loss but be happy for $1,000 profit. I'd rather have this situation then buy $10,000 in VTI and seeing it go to $11,000 or even $11,100.
C. Most importantly being able to value stock independently of what Mr. Market tells you they are worth is very valuable skill. This is especially true and market heights and market bottoms.
Reading retirement boards both in the 2000-2002 bear markets and especially in the 2008/9 crash. I was struck by the difference in behavior and outlook between strictly index investors and the individual stock purchasers. Say you are closing in on retirement with $600K (400K, stock 200K bonds) at the beginning of 2008. By Jan 2009 when it is time to do your rebalancing you have $240k in each. First its hard to to lose a couple years salary and many years saving. But it is especially hard to have the discipline to sell the bonds fund which have been going up and buy the stock fund which continue to go down ever day. Some people did, but plenty of index investor said no I'm going wait until the market settles down before buying in. Some are still waiting.
In contrast many/most of the individual stock pickers were excited about the bargains in Apple, or Realty Income, or Berkshire Hathaway etc. How did we know they were bargains? Precisely because we asked the exact same questions as the OP is JNJ with P/E of 17 a dividend yield of 2.67 and Debt ration of 18% and better deal than PG with P/E of 25 dividend of 2.75 and Debt of 29. When the P/E for both stock got down to 11-12 in 2009 and the dividend yields approach 4% the answer is both were bargain. Even if you ultimately decide screw it I can't decide which is the better bargain and I'll buy VTI, there is real value in fundamental understanding of what you are buying.
It was easier for the 65-70 years old guys who had been stock picking for 40 years than myself at 50 to buy at the bottom. It was easier for me to buy in 2008/9, then it was to have courage to buy after the Oct 87 crash. Frankly the only way you have 25 years experience in the stock market is to start early. Even if you have underperformed the market with 10-20% of your portfolio by a couple percentage for years, avoiding the tech bubble of 2000, and not selling at the bottom in 2008/9 is worth a ton.