Organon & Co. (NYSE: OGN)

Sector: Healthcare Industry: Drug Manufacturers - General CIK: 0001821825
Market Cap 1.85 Bn
P/B -3.14
P/E 3.17
P/S 0.30
ROIC (Qtr) 8.18
Div Yield % 15.66
Rev 1y % (Qtr) 1.26
Total Debt (Qtr) 8.83 Bn
Debt/Equity (Qtr) 9.74
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About

Investment thesis

Bull case

  • Healthy cash reserves of 672M provide 14.93x coverage of short-term debt 45M, demonstrating strong liquidity position and minimal refinancing risk.
  • Robust free cash flow of 780M exceeds capital expenditure of 169M by 4.62x, indicating strong organic growth funding capability.
  • Robust tangible asset base of 7.53B provides 3.73x coverage of working capital 2.02B, indicating strong operational backing.
  • Tangible assets of 7.53B provide robust 4.83x coverage of other current liabilities 1.56B, indicating strong asset backing.
  • Operating cash flow of 949M provides strong 9.30x coverage of operating expenses 102M, showing operational efficiency.

Bear case

  • Operating cash flow of 949M barely covers its investment activities of (621M), with a coverage ratio of -1.53, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Investment activities of (621M) provide weak support for R&D spending of 405M, which is -1.53x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Operating cash flow of 949M provides thin coverage of dividend payments of (158M) with a -6.01 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 672M provide limited coverage of acquisition spending of (397M), which is -1.69x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Free cash flow of 780M represents just -2.79x of debt issuance (280M), suggesting concerning reliance on leverage rather than internal cash generation for growth.

Peer comparison

Companies in the Drug Manufacturers - General
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 LLY ELI LILLY & Co 1,096.48 Bn 444.66 53.21 42.50 Bn
2 JNJ Johnson & Johnson 586.00 Bn 21.86 6.22 47.93 Bn
3 MRK Merck & Co., Inc. 351.73 Bn 29.51 8.33 41.37 Bn
4 ABBV AbbVie Inc. 346.46 Bn 41.07 10.17 68.74 Bn
5 AZN Astrazeneca Plc 324.54 Bn 31.74 5.53 29.62 Bn
6 NVS Novartis Ag 322.29 Bn 23.05 5.69 35.46 Bn
7 GILD Gilead Sciences, Inc. 237.69 Bn 78.03 22.28 24.94 Bn
8 AMGN Amgen Inc 233.95 Bn 29.40 9.93 54.60 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.76 2.46
EV to Cash from Ops. EV/CFO 15.33 38.77
EV to Debt EV to Debt 1.16 6.68
EV to EBIT EV/EBIT 8.57 37.43
EV to EBITDA EV/EBITDA 6.83 30.58
EV to Free Cash Flow [EV/FCF] EV/FCF 23.36 50.59
EV to Market Cap EV to Market Cap 5.54 1.31
EV to Revenue EV/Rev 1.67 8.62
Price to Book Value [P/B] P/B -3.14 5.91
Price to Earnings [P/E] P/E 3.17 44.84
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 3.17 0.95
Dividend Payout Ratio % Div Payout % (Qtr) 31.10 65.78
Dividend per Basic Share Div per Share (Qtr) 0.60 2.89
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 20.00 40.65
Interest Coverage Int. cover (Qtr) 2.36 20.38
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 14.21 -17.39
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -11.93 74.29
Dividend Growth (1y) % Div 1y % (Qtr) -46.43 3.76
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -59.81 71.80
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -3.44 65.77
EBIT Growth (1y) % EBIT 1y % (Qtr) -6.31 63.01
EBT Growth (1y) % EBT 1y % (Qtr) -10.23 306.04
EPS Growth (1y) % EPS 1y % (Qtr) -61.93 348.81
FCF Growth (1y) % FCF 1y % (Qtr) 4.14 11.69
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -7.12 7.99
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.46 0.39
Cash Payout Ratio Cash Payout (Qtr) 0.14 0.28
Cash Ratio Cash Ratio (Qtr) 0.25 2.08
Current Ratio Curr Ratio (Qtr) 1.75 6.16
Debt to Equity Ratio Debt/Equity (Qtr) 9.74 -0.39
Interest Cover Ratio Int Coverage (Qtr) 2.36 20.38
Times Interest Earned Times Interest Earned (Qtr) 2.36 20.38
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 24.70 -13.64
EBIT Margin % EBIT Margin % (Qtr) 19.31 -10.45
EBT Margin % EBT Margin % (Qtr) 11.14 -25.59
Gross Margin % Gross Margin % (Qtr) 55.00 65.04
Net Profit Margin % Net Margin % (Qtr) 8.00 -34.87