Organon Stock To $7?

Organon (OGN) stock has fallen 23% during the past day, and is currently trading at $7.06. Our machine-driven multi-factor assessment suggests that it may be time to sell OGN stock. We have, overall, a pessimistic view of the stock, and a price of $7 may not be out of reach. We believe there are several things to fear in OGN stock given its overall Very Weak operating performance and financial condition. Hence, despite its Very Low valuation, we think that the stock is Unattractive.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $1.8 Bil in market cap, Organon provides prescription therapies in women’s health, including contraception and fertility, along with cardiovascular products, serving wholesalers, retailers, hospitals, and government agencies globally.

[1] Valuation Looks Very Low

This table highlights how OGN is valued vs broader market. For more details see: OGN Valuation Ratios

[2] Growth Is Very Weak

• Organon has seen its top line shrink at an average rate of -0.4% over the last 3 years
• Its revenues have fallen -1.0% from $6.3 Bil to $6.3 Bil in the last 12 months
• Also, its quarterly revenues declined -0.8% to $1.6 Bil in the most recent quarter from $1.6 Bil a year ago.

This table highlights how OGN is growing vs broader market. For more details see: OGN Revenue Comparison

[3] Profitability Appears Moderate

• OGN last 12 month operating income was $1.3 Bil representing operating margin of 21.3%
• With cash flow margin of 13.2%, it generated nearly $826 Mil in operating cash flow over this period
• For the same period, OGN generated nearly $700 Mil in net income, suggesting net margin of about 11.1%

This table highlights how OGN profitability vs broader market. For more details see: OGN Operating Income Comparison

[4] Financial Stability Looks Very Weak

• OGN Debt was $8.9 Bil at the end of the most recent quarter, while its current Market Cap is $1.8 Bil. This implies Debt-to-Equity Ratio of 485.4%
• OGN Cash (including cash equivalents) makes up $599 Mil of $14 Bil in total Assets. This yields a Cash-to-Assets Ratio of 4.4%

[5] Downturn Resilience Is Very Weak

OGN has fared much worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• OGN stock fell 72.2% from a high of $39.36 on 2 March 2022 to $10.95 on 16 November 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $23.03 on 26 August 2024 , and currently trades at $7.06

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read OGN Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

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