Sometimes combining companies creates a much stronger entity, far beyond what either can do alone. Or using some loose Wall Street math, sometimes one plus one equals more than two.
But splitting up a company can add value, too, often by pairing the right assets with the right investors. Corteva is a case in point. It recently spun out its seeds business, Vylor, and Wall Street likes both stocks.
Analysts expect a total greater value from the two companies separately than combined. (Or with more Wall Street math: one minus one, in this case, also equals more than two.)
On Tuesday evening, KeyBanc analyst Salvator Tiano initiated coverage of Corteva and Vylor. He rates Corteva stock Buy with a price target of $17. He rates Vylor stock Hold and doesn't have a price target for shares.
Corteva stock was up 0.1% at $13.93 in early trading, while the S&P 500 was down 0.5%. Vylor stock rose 1.9% to $74.30.
Corteva stock's gains likely are limited because it jumped 12% on Tuesday after J.P. Morgan said to buy shares. After the spinoff, Corteva was trading for about six times earnings before interest, taxes, depreciation, and amortization, or Ebitda. That is a low, commodity-like multiple for a stock with some growth potential.
Corteva makes crop protection chemicals and biologics, and many are patent-protected.
Corteva's "valuation is highly attractive," wrote Tiano. Shares trade similar to those of fellow crop chemical producer FMC, but are less risky, he says, adding that Corteva's free cash flow yield is approaching 10%.
Seven other analysts have started coverage of Vylor, but with a Buy rating. One was BMO.
"We view Vylor as a high-quality, innovation-driven global seeds leader with a strong moat and durable growth, underpinned by germplasm-led pricing, expanding licensing revenues, and a deep innovation pipeline," analyst Joel Jackson wrote earlier this week.
His target price is $85, which works out to roughly 17 times 2027 estimated Ebitda of about $3.1 billion.
The average analyst price target for Vylor is about $81.
Investors received one share of Vylor for each share of Corteva. Old Corteva traded at $77.65 before the spin. Now, the two stocks are at a combined $88.39, up 14% from the pre-spin level.
It really was a case of less being more for Corteva.