I was checking my brokerage account. To my surprise, I saw that I owned a small number of shares of a company I had never heard of: Organon (OGN). Evidently, it was a spin-off from Merck that I completely missed.Now knowing that I owned SEVERAL HUNDREDS of dollars worth of Organon, I did some research about what they do and whether or not it might be worth keeping. The answer appears to be that it might be one of the few "cheap" stocks on the market.The short version of the story is that Organon is basically several of Merck's legacy businesses that amount to ~$6 billion in sales. Focus areas are women's health, biosimilars, and "established products" i.e. a bunch of old products with flat/declining sales. I know, exciting stuff.Peter Lynch was a fan of spin-offs because they don't get much attention and he felt that sometimes created value. It can also help as the new company can focus on growing smaller business areas that were not of interest to the parent company. It appears that might be the case here where just modest growth could drive multiple expansion and a much higher stock price:Organon is a stereotypical spin-off opportunity, where forced or indiscriminate selling, muted publicity, and unattractive legacy financials coalesce to keep valuation depressed upon initial trading. My diligence and modeling suggests a high probability that growth will return in 2022, which should drive a doubling of the multiple and potentially 100% upside in the stock.https://seekingalpha.com/article/4433176-organon-100-percent...I only own the small number of shares I received from the spin-off. However, while I consider what to do, I figured the value hounds would be interested in taking a look.
Barron's had a short write-up. IIRC $8B market cap (at $34, so more like $7B now), $9.6B in debt. Forward P/E probably around 10, EV/EBITDA 16 so in line with mature drug companies. 80% revenue non-US. May institute a dividend of ~3%. Company expects low to mid single digit growth. Could be a nice boring stock. Getting dumped now as usually happens after a 10:1 spinoff. I had good luck with KTB so I bought a bit, will buy more if it keeps falling.
I know someone who works there. Had a choice between staying with Merck or going with spinco. Chose later, which tells me at least one insider was excited by the prospects.
Post spin-off volume has stabilized. Still no accumulation in sight. Separately, looks like they are going to be bleeding revenue on existing products and the growth is going to compensate that and provide low single digit growth.
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