SOLV

Solventum is the 2024 spin-off of 3M's health-care business — surgical/medical instruments, wound care, dental and health information systems. The post-spin numbers are improving sharply: FY2025 net income jumped 224.8% to $1.56B and operating income rose 110.5% to $2.18B as the first-year separation costs that depressed FY2024 (net income just $479M) rolled off. Underlying quality is strong — 53.5% gross margin, 26.2% operating margin, 18.7% net margin and a 30.8% return on equity. Management is also deleveraging aggressively: long-term debt fell 35.5% to $5.04B, total liabilities dropped 19.6%, and equity grew 70.6% to $5.05B, cutting leverage to 1.83x.

The headline opportunity is valuation. At $75.43 the stock trades at only 8.5x earnings and 1.6x sales for a diversified, high-margin med-tech franchise — a discount that reflects its short standalone track record and modest top-line growth (revenue up just 0.9% to $8.32B, roughly flat across FY2022-FY2025). A newly authorized $1 billion buyback (no repurchases yet) plus the rapid balance-sheet repair suggest management sees the shares as undervalued.