2024-04-17 03:00:06 ET
Summary
- Kenvue is a spinout from Johnson & Johnson, housing consumer health care brands like Tylenol and Benadryl.
- The spinout was driven by JNJ's desire to improve margins and growth by spinning off the consumer health care division.
- A mispricing of the IPO caused KVUE's stock to decline from day one.
- After Kenvue's decline, I believe the stock is now fairly valued compared to its peers, with a 16.7x Fwd P/E and a 3.1% dividend yield. I would look to revisit the company on any pullbacks.
A corporate spinout may be a source of alpha for those with a keen eye for value and be willing to do a bit of homework. A spinout can occur for a variety of reasons, but typically, it involves segments or subsidiaries of a larger company that may not get the attention it deserves from analysts and investors. Alternatively, the parent company may want to jettison low growth or low margin businesses so the remaining core business segments can attain a higher valuation multiple....
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Kenvue: Fairly Valued Spinout