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Why Organogenesis Holdings Blasted 7.7% Higher Today

By Eric Volkman - May 27, 2021 at 5:57PM

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The company will be a component of a high-profile stock index.

What happened

Organogenesis Holdings (ORGO -6.62%), a regenerative health products specialist, shot skyward Thursday thanks to its inclusion on a key stock market index.

So what

On Wednesday, after market close, S&P Dow Jones Indices -- operator of the famous S&P family of indexes -- announced a pair of changes to two of those indexes. Organogenesis healthcare sector peer Cantel Medical is being removed from the S&P MidCap 400 index, as it's being acquired by Steris.

Man attending to a child's leg injury.

Image source: Getty Images.

Cantel, therefore, needs to be replaced, and the chosen party is shoe maker Crocs, currently a component of the S&P SmallCap 600 index. Since Crocs is vacating its S&P SmallCap 600 index spot, it also must have a successor, and Organogenesis has been tapped for the position.

These changes will be effective prior to market open next Wednesday, June 2.

Since S&P indexes are considered by many investors to be the benchmark equities indicators, inclusion on one instantly raises a company's profile. So it is with Organogenesis, a young healthcare company that has shown strong growth and more habitual profitability of late but was largely unknown by the general investing public.

Now what

Inclusion on any index, no matter how high profile, barely -- if at all -- affects a company's fundamentals or business strategy. Organogenesis will now be targeted by index funds trawling the S&P indicators for good growth stocks, but investors are better off buying the stock if they believe in its potential rather than its popularity.

 

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Organogenesis Inc. Stock Quote
Organogenesis Inc.
ORGO
$4.23 (-6.62%) $0.30
Cantel Medical Corp. Stock Quote
Cantel Medical Corp.
CMD
Steris Plc Stock Quote
Steris Plc
STE
$210.22 (-1.22%) $-2.60
Crocs, Inc. Stock Quote
Crocs, Inc.
CROX
$72.85 (-5.29%) $-4.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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