Neogen Stock To $7?
Neogen (NEOG) stock has jumped 32% during the past day, and is currently trading at $9.71. Our multi-factor assessment suggests that it may be time to sell NEOG stock. We have, overall, a pessimistic view of the stock, and a price of $7 may not be out of reach. We believe there are several things to fear in NEOG stock given its overall Weak operating performance and financial condition. This isn’t appropriately reflected in the stock’s Moderate valuation which is why we think it is Unattractive.
Below is our assessment:
| CONCLUSION | |
|---|---|
| What you pay: | |
| Valuation | Moderate |
| What you get: | |
| Growth | Weak |
| Profitability | Very Weak |
| Financial Stability | Moderate |
| Downturn Resilience | Moderate |
| Operating Performance | Weak |
| Stock Opinion | Unattractive |
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Let’s get into details of each of the assessed factors but before that, for quick background: With $2.1 Bil in market cap, Neogen provides global food and animal safety solutions, including diagnostic test kits, veterinary instruments, pharmaceuticals, vaccines, and pest control products to ensure health and safety.
[1] Valuation Looks Moderate
| NEOG | S&P 500 | |
|---|---|---|
| Price-to-Sales Ratio | 2.4 | 3.3 |
| Price-to-Earnings Ratio | -2.0 | 23.7 |
| Price-to-Free Cash Flow Ratio | -664.8 | 21.1 |
This table highlights how NEOG is valued vs broader market. For more details see: NEOG Valuation Ratios
[2] Growth Is Weak
- Neogen has seen its top line grow at an average rate of 23.2% over the last 3 years
- Its revenues have fallen -2.8% from $912 Mil to $887 Mil in the last 12 months
- Also, its quarterly revenues declined -3.6% to $209 Mil in the most recent quarter from $217 Mil a year ago.
| NEOG | S&P 500 | |
|---|---|---|
| 3-Year Average | 23.2% | 5.6% |
| Latest Twelve Months* | -2.8% | 6.2% |
| Most Recent Quarter (YoY)* | -3.6% | 7.3% |
This table highlights how NEOG is growing vs broader market. For more details see: NEOG Revenue Comparison
[3] Profitability Appears Very Weak
- NEOG last 12 month operating income was $-20 Mil representing operating margin of -2.3%
- With cash flow margin of 9.8%, it generated nearly $87 Mil in operating cash flow over this period
- For the same period, NEOG generated nearly $-1.0 Bil in net income, suggesting net margin of about -117.6%
| NEOG | S&P 500 | |
|---|---|---|
| Current Operating Margin | -2.3% | 18.8% |
| Current OCF Margin | 9.8% | 20.5% |
| Current Net Income Margin | -117.6% | 13.1% |
This table highlights how NEOG profitability vs broader market. For more details see: NEOG Operating Income Comparison
[4] Financial Stability Looks Moderate
- NEOG Debt was $793 Mil at the end of the most recent quarter, while its current Market Cap is $2.1 Bil. This implies Debt-to-Equity Ratio of 37.8%
- NEOG Cash (including cash equivalents) makes up $139 Mil of $3.4 Bil in total Assets. This yields a Cash-to-Assets Ratio of 4.1%
| NEOG | S&P 500 | |
|---|---|---|
| Current Debt-to-Equity Ratio | 37.8% | 20.4% |
| Current Cash-to-Assets Ratio | 4.1% | 7.2% |
[5] Downturn Resilience Is Moderate
NEOG saw an impact slightly better than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.
2022 Inflation Shock
- NEOG stock fell 77.7% from a high of $48.34 on 20 April 2021 to $10.79 on 20 October 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- The stock is yet to recover to its pre-Crisis high
- The highest the stock has reached since then is $23.84 on 15 August 2023 , and currently trades at $9.71
| NEOG | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -77.7% | -25.4% |
| Time to Full Recovery | Not Fully Recovered | 464 days |
2020 Covid Pandemic
- NEOG stock fell 25.8% from a high of $36.38 on 14 February 2020 to $27.01 on 18 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 27 May 2020
| NEOG | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -25.8% | -33.9% |
| Time to Full Recovery | 70 days | 148 days |
2008 Global Financial Crisis
- NEOG stock fell 42.5% from a high of $5.20 on 21 October 2008 to $2.99 on 11 March 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 2 September 2009
| NEOG | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -42.5% | -56.8% |
| Time to Full Recovery | 175 days | 1,480 days |
But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read NEOG Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
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