Quick Value #311 - Gen Digital (GEN)
A 30-second look at this super cheap, beaten down software company (yes, it's a mean reversion bet)
This isn’t my usual Quick Value write-up today (check those out here)…
A quick backstory (or jump straight down to the idea):
On a personal level, the past few weeks/months have been absolutely nuts — ~20,000 miles traveled for one of our OpCos, closed on an acquisition in the insurance space, completed a divestiture within an OpCo, knocked out a balance sheet recap, and wrapped up the first part of a (first ever) capital raise…
That left very little time to explore new stock ideas at a time where the markets had/have lots going on!
So last night, I’m flipping through a few names on my watchlist, got to Gen Digital (GEN, $19), and it completely stopped me in my tracks…
This idea first hit my radar in late 2019 when Symantec (as Gen was known back then) sold their enterprise software business to Broadcom for ~$11bn and become a pure-play consumer software company with $1.50+ earnings power.
Here is my 30 seconds of (re)work on the idea:
First, I needed a refresh on what the company does (it’s been 5 years since I wrote about it) — Turns out they acquired some additional brands which now include Norton, LifeLock, Avast, and MoneyLion as their core products (it’s like a better version of Ziff Davis (ZD) for those who follow it)… revenue is mostly subscription-based with a “freemium” model in some cases, MoneyLion is a fintech neobank so it’s a slightly different model. Flipping through my 5-year-old quick value note and I saw this “Big Goals” slide suggest ~$3 earnings power in 3-5 years time, from a $1.44 starting point in FY21 (we’ll come back to this):
FY2021 “big goals” slide Then I checked the chart which shows it went nowhere for 5+ years — GEN is a major market underperformer and almost certainly getting caught up in the “AI disruption” narrative (shares down from $30+ to $19). Maybe a bit of a falling knife here?
$GEN 5yr chart Then I looked at the valuation — It’s way off historic multiples… at 7x forward earnings, GEN trades at nearly a 40% discount to its 5-year median P/E multiple (which would make this a $30+ stock). [The light-orange-shaded area behind the P/E multiple are earnings per share.]
Valuation history Next, I wanted to see what earnings trends looked like — If the stock is getting pummeled, then earnings must be awful right? Nope. They’re steadily making progress on the “$3 per share earnings power” laid out in the “Big Goals” slide from earlier. In fact, analyst estimates have Gen at $2.87 EPS in FY27 (calendar 2026) which is spitting distance from their original plan and another year of 10%+ EPS growth.
Earnings trends
I’m making this out to be a simpler story than it probably is… there are some risks and counterarguments here:
There’s a decent amount of debt — $8bn net debt on $2.5bn EBITDA = ~3.2x leverage (and 5.3x trailing free cash flow of $1.5bn)
I’ve done zero work on churn or customer retention for these consumer software products which is clearly important to the thesis
MoneyLion was acquired in April 2025 so growth benefits are rolling off — on the other hand, management is restarting share buybacks with $305m spent in the past quarter (~2.6% of current market cap)
Summing it up…
There are 606m shares outstanding x $19 = $11.5bn market cap. Net debt of $8bn makes it a $19.5bn enterprise value.
FCF is consistently >$1-1.5bn (10-15% FCF yield) and while management is targeting less than 3x leverage, they are starting to balance debt paydown with buybacks.
A simple mean reversion thesis would have this trading close to $30 per share on 10-11x earnings. That’s ~60% upside from here. What about the downside? Ziff Davis might be a decent proxy, and at lows it traded around 4-5x earnings. On $2.60-2.80 per share, I’ll call that $11-14 downside target (25-40%).
So this is something like 1.5-2.5x upside/downside ratio.
The market seems to be pricing GEN like a melting ice cube consumer software business. That group is down 20-30% over the past year while trading at 7-8x forward earnings at the moment:
Would you pick GEN out of the options on this list?
Hmm…
Disclosure: no position in GEN as of this writing, but I’ll probably add a starter position by week’s end; and then I’ll actually open up the 10-K and do some homework :) DYODD
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