Embecta (EMBC), mcap=$1.5bn, price $26.67 vs $30.5

Pitch: Classic orphan spinoff – no index inclusion, small relative to the parent, post-spin price drop. #1 globally in pen needles and syringes, the market leader in single-use needles for insulin with 67% global share. Very stable business with 30%+ EBITDA margins. New mgtm plans to reinvest FCF to build out a pipeline of new medical devices targeting diabetes care – the most advanced product Type 2 diabetes patch pump in development since 2016 and with recent breakthrough device designation from FDA. Growing medical device companies targeting diabetes trade at dramatically higher EV/sales and EV/EBITDA multiples.

Valuation: EMBC trades at 2.7x 2022 revenues and 7.0x 2022 EBITDA. Or at 6.6x fully rebased 2024 EBITDA. At 4.5x revenues, in line with the closest peer, would be a $70 stock.

Exp. gain: 150% to $70/share.

Full EMBC write-up (free guest account required):

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