On Monday, Piper Sandler showed confidence in Organon & Co. (NYSE: OGN) by raising the price target on the company's stock to $24.00, an increase from the previous target of $22.00. The firm maintained its Overweight rating on the pharmaceutical company's shares.
The adjustment in the price target reflects a change in the valuation approach. Piper Sandler's analysts are now basing the price target on an enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of 7x. This multiple applies to their 2024 estimated EBITDA of $2,020 million, which is a slight decrease from the prior estimate of $2,064 million.
The revision in the price target comes as Piper Sandler discontinues the use of a discount period in their price target calculation. The decision aligns with the firm's focus on the 2024 EBITDA estimate, which serves as the primary factor driving the updated price target.
Piper Sandler's commentary on the revised target was clear: "Our price target of $24 (up from $22) is based on an EV/EBITDA multiple of 7x (unchanged) our 2024E EBITDA estimate of $2,020M (from $2,064M previously). We are no longer using a discount period for our PT calculation as it is based on 2024 EBITDA (that is the key driver of our revised PT)."
InvestingPro Insights
As Organon & Co. (NYSE: OGN) garners attention with Piper Sandler's updated price target, insights from InvestingPro provide additional context for investors considering the pharmaceutical company's stock. With a market capitalization of $4.77 billion and a notably low P/E ratio of 4.41 for the last twelve months as of Q4 2023, Organon & Co. presents a compelling valuation proposition. This is further supported by a PEG ratio of 0.42, indicating that the company's earnings growth may not be fully reflected in its current share price.
InvestingPro Tips highlight that Organon & Co. has a high shareholder yield and is trading at a low P/E ratio relative to near-term earnings growth, suggesting that the stock may be undervalued. Moreover, the company has been profitable over the last twelve months and pays a significant dividend to shareholders, with a yield of 6.04% as of the most recent dividend ex-date on February 23, 2024. These factors, combined with a strong free cash flow yield, could be of interest to value-oriented investors.
For those seeking a deeper analysis, InvestingPro offers additional tips on Organon & Co., which can be accessed through InvestingPro's platform. Interested readers can use the coupon code PRONEWS24 to receive an extra 10% off a yearly or biyearly Pro and Pro+ subscription. In total, there are 8 more InvestingPro Tips available that provide a comprehensive understanding of Organon & Co.'s financial health and market potential.
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