Organon & Co. (OGN): what the price requires
The current priced-in claim for Organon & Co. (OGN) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/OGN
Headline
| Field | Value |
|---|---|
| Ticker | OGN |
| Company | Organon & Co. |
| Current price | $13.50/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 9.9% |
| Operating margin today | 12.7% |
| Margin compression implied | -2.8pp |
| Multiple paid | 14x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.
Solve inputs: computed at a 7% cost of capital with 4% terminal growth over a 5-year stage (computed at the 7% minimum rate; the CAPM rate 6.2% sits below it).
Reconcile: at the x-ray's 9.3% required return this reads ~5.9%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.65σ |
| cohort percentile (of 112 peers) | 21 |
| implied end-window share | 0% |
Valuation X-Ray
The price is supported by asset-based and relative-multiple and growth-DCF value, while earnings-power lands below the price. A value/asset-supported name, not a pure growth bet.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.11x | 4 | expensive |
| Earnings | 9.21x | 2 | expensive |
| Relative | 0.37x | 2 | justifies |
| Growth | 0.61x | 3 | justifies |
Families that justify the price: Asset, Relative, Growth Families that call it expensive: Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 3.3%); the inversion above states its own rate.
Per-Model Detail (n=11)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $55.23 | 0.24x | yes | FCF base $0.7B, growth -2% (input: historical growth), terminal g 0.5%, WACC 3.3%, 5yr projection |
| DCF Exit Multiple | Growth | $22.20 | 0.61x | yes | Exit EV/EBITDA: 280.5x / 282.5x / 284.5x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $22.56 | 0.60x | yes | P/E 24x (static sector reference · 2026-04), scenarios: 20.3x / 24.0x / 27.7x (bear / base = reference held flat / bull), EV/EBITDA 35.2x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $10.12 | 1.33x | yes | BV/sh $3.43, ROE (TTM) 27.2%, ke 9.3% |
| Two-Stage Excess Return | Asset | $17.64 | 0.77x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $8.03 | 1.68x | yes | Rev $6.2B, growth -2% (input: historical growth; tapered), Terminal P/S: 0.5x / 0.6x / 0.7x (bear / base = today's held flat / bull, cap 8x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | — | — | no | — |
| Residual Income | Asset | $15.19 | 0.89x | yes | BV $3.43 + 5yr PV of (ROE (TTM) 27.2% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $8.52 | 1.58x | yes | √(22.5 × EPS $0.94 × BVPS $3.43) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $0.01 | 1350.00x | yes | EBITDA $0.04B × sector EV/EBITDA 16.0x (excluded from median) |
| FCF Yield | Earnings | $0.01 | 1350.00x | yes | FCF $683.0M / Kₑ 9.3% — zero-growth perpetuity (excluded from median) |
| SBC-Adj FCF Yield | Earnings | $0.01 | 1350.00x | yes | SBC-adj FCF $0.61B (FCF $0.68B − SBC $0.07B) capitalized at Kₑ (excluded from median) |
| Ben Graham Formula | Earnings | $0.79 | 17.09x | yes | EPS $0.94 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | — | — | no | — |
| P/Sales Sector | Relative | $93.77 | 0.14x | yes | Revenue $6.16B × sector P/S 4.0x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $10.16 | 1.33x | yes | EPS $0.94 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $7.5b |
| Net debt / NOPAT (after-tax) | 13.87x |
| Net debt / operating income (pre-tax) | 9.51x |
| Interest coverage | 1.6x |
| Share count CAGR (dilution) | 0.8% |
| Burning cash | no |
Bullet Takeaways
- Organon is the women's-health and established-brands business Merck spun off in 2021, generating about $6.2 billion in revenue with the women's-health franchise contributing roughly $1.8 billion, but carrying the debt that came with the spinoff.
- The defining fact is the May 2025 dividend cut, from $1.12 to $0.08 per share, a near-elimination made to redirect roughly $345 million a quarter toward paying down nearly $9 billion of gross debt.
- What to watch is whether deleveraging and the Nexplanon five-year label can offset the organic decline in established brands, which face "Generic Competition" across most of the portfolio.
Bull Case
The counterintuitive number on Organon is the return on equity, which runs above 27%, an eye-catching figure for a stock trading near $13. The catch, and the insight, is that this return sits on a sliver of book equity, about $3.43 per share, a legacy of the leveraged spinoff from Merck that left the company with substantial debt and thin equity. Read correctly, that high ROE is not a sign of a great business; it is a sign of a heavily leveraged one. But it does point to the real bull thesis: Organon throws off a lot of cash relative to its equity, and the entire investment case is about where that cash now goes.
After May 2025, it goes to the balance sheet. The company cut its dividend from $1.12 to $0.08 per share, freeing roughly $345 million a quarter to repay debt, a hard pivot from income story to deleveraging story. With about $683 million of trailing free cash flow and a net leverage ratio it is targeting below 4.0 times, every quarter of debt paydown transfers value from creditors to equity holders. For a company where the debt is the overhang, shrinking the debt is the cleanest way to grow the equity, and the market is paying a deeply discounted price for that arithmetic to play out.
The operating portfolio is more durable than the declining-pharma label suggests. Women's health, anchored by the Nexplanon contraceptive implant, is the growth engine, and the FDA approved extending Nexplanon's label from three years to five, broadening its addressable use with implementation in 2026. The biosimilars segment is regaining traction with new launches into a large global market. The stock is supported by asset-based, peer-multiple, and cash-flow methods, all of which land at or above today's price; this is a value-and-cash-flow name, not a growth bet. The bull case is that a discounted, cash-generative business deleverages its way to a higher equity value while a couple of franchises grow.
Bear Case
Read Organon's earnings as a base that is eroding, because most of the portfolio is in structural decline. The established-brands business, the bulk of revenue, is a collection of older drugs past their patent protection, and the 10-K is blunt about the dynamic: except for a handful of products, "our established brands pr"oducts face "Generic Competition." Generic competition is not a cycle that recovers; it is a one-way ratchet that takes price and volume year after year. The 2025 revenue of $6.2 billion reflected organic decline across major franchises, with biosimilars and growth drivers only partially offsetting the headwinds from established brands and Nexplanon. A business whose largest segment shrinks structurally has to run hard just to stay flat.
The debt turns that decline into a real risk. Organon carries nearly $9 billion of gross debt against about $1.1 billion of liquid assets, and interest coverage is only about 1.6 times trailing operating income. That is a thin cushion: a company covering its interest just 1.6 times has little room if operating income slips, and operating income is exactly what generic erosion threatens. The dividend cut was not a strategic choice made from strength; it was a near-elimination, from $1.12 to $0.08, that the company made because the debt load demanded it. When a company slashes its dividend by 93% to service debt, it is telling investors the balance sheet was the binding constraint.
The deleveraging thesis is therefore a race against the franchise erosion. If established-brand declines outpace the cash freed up by the dividend cut and the growth from women's health and biosimilars, net leverage does not fall fast enough and the equity stays trapped under the debt. The Nexplanon label extension helps, but it is one product against a broad portfolio of declining ones, and the new REMS program adds implementation complexity. The bear case is the classic leveraged-value-trap setup: the stock looks cheap on cash flow, but the cash flow is built on an eroding base, and the debt leaves no margin for the erosion to run faster than the turnaround.
Valuation
The price is making a low bar of a bet, which is what makes Organon a value question rather than a growth one. Working the price backward, today's $13.42 (June 27, 2026) sits below what even a 5% annual decline in operating profit would warrant; the market is not asking the business to grow, it is pricing in continued erosion and still finding the stock cheap on that basis. The blended multiple of roughly 14 times earnings, against a 12.8% operating margin, reflects a business the market expects to shrink, not expand.
The methods mostly agree it is inexpensive, with one important exception. The asset-based, peer-multiple, and cash-flow methods land at or above the price; a sector P/E comparison and the asset lenses both read it as cheap. The one method that says expensive is the earnings-power lens, and it does so because the normalized operating-income figure it capitalizes is distorted, dragged down by the recent earnings volatility a spun-off, restructuring company shows. The honest read is that the cash-flow and asset methods, which value the business on what it actually generates, dominate here: this is a discounted, cash-producing business, and the price embeds decline rather than growth.
The decisive factor is leverage, and it overrides the cheap multiple. Net debt of about $7.47 billion, roughly 9.5 times operating income, with interest coverage near 1.6 times, is the structural fact that determines whether the equity is cheap or a trap. At that coverage level, the equity value is highly sensitive to operating-income changes: a modest decline in cash flow compresses the thin coverage and the equity cushion together. The dividend cut redirected cash to debt paydown, which is the right move, but the valuation comes down to a single question of timing, whether the company can delever faster than its established brands erode. The price is cheap on the numbers; what a buyer underwrites is that the deleveraging wins the race.
Catalysts
The dividend cut is the event that reset the entire story. In May 2025 Organon reduced its dividend from $1.12 to $0.08 per share, redirecting roughly $345 million a quarter to debt repayment, and explicitly reframing the company from an income vehicle to a deleveraging one. The pace of debt paydown and the trajectory of the net leverage ratio toward the company's sub-4.0-times target are now the metrics that matter most.
The Nexplanon label extension is the clearest growth catalyst. The FDA approved moving the Nexplanon implant from three years to five, which broadens its market reach, with a new REMS program to be implemented in 2026. A longer-duration contraceptive implant strengthens the women's-health franchise that is the company's most durable asset. Alongside it, the biosimilars segment is rolling out new products into a large global market, providing a second potential offset to established-brand decline.
The overhang to monitor against those positives is the erosion rate of the established brands. The 2025 revenue of $6.2 billion came with organic declines across major franchises as generic competition pressured the older portfolio. The quarterly trend in established-brand revenue, set against the growth from women's health and biosimilars, is the read on whether the deleveraging plan outruns the franchise decline. Any change in the cost of refinancing the debt is the external variable that bears most directly on a balance sheet this leveraged.
Peer Cohorts (Per Segment, With Filing Citations)
Pharmaceuticals (women's health & general medicines) (reported)
- VTRS (Viatris Inc)
- (no filing in the citation store)
- TEVA (TEVA PHARMACEUTICAL INDUSTRIES LIMITED)
- (no filing in the citation store)
- AMRX (AMNEAL PHARMACEUTICALS, INC.)
- (no filing in the citation store)
- PRGO (Perrigo Company plc)
- (no filing in the citation store)
- BHC (Bausch Health Companies Inc.)
- (no filing in the citation store)
- INDV (Indivior Pharmaceuticals, Inc.)
- (no filing in the citation store)
- PBH (PRESTIGE CONSUMER HEALTHCARE INC.)
- (no filing in the citation store)
- ELAN (Elanco Animal Health Incorporated)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Organon 2025 results · Organon 2025 dividend announcement