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Category: Stock Market and Neogen Corporation
Date: 28 September 2019 Stock Price: $65.23 We take a look at the 1st quarter earnings release of their 2020 fiscal year of Neogen Corporation a company that develops and markets products dedicated to food and animal safety.
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About Neogen Corporation
Neogen Corporation develops and markets products dedicated to food and animal safety. The company’s Food Safety Division markets dehydrated culture media and diagnostic test kits to detect foodborne bacteria, natural toxins, food allergens, drug residues, plant diseases and sanitation concerns. Neogen’s Animal Safety Division is a leader in worldwide biosecurity products, animal genomics testing and the manufacturing and distribution of a variety of animal healthcare products, including diagnostics, pharmaceuticals and veterinary instruments.
The image below shows some of Neogen's broad product categories.
The image below shows some of Neogen's broad product categories.
Overview of Neogen Corporation's latest earnings report
The numbers we are interested in (for the quarter):
- Revenue: $101.424 million (up from $99.626 million from the same quarter of the previous year)
- Revenue increased by 1.8% over the last 12 months
- Cost of sales: $53.230 million (up from $52.897 million for the same quarter of the previous year)
- Cost of sales increased by 0.63% over the last 12 months
- Net income: $14.652 million (down from $15.237 million for the same quarter of the previous year)
- Diluted earnings per share: $0.28 (down from $0.29 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 52.684 million (down from 52.780 million for the same quarter of the previous year)
- Cash and cash equivalents: $291.016 million
- Cash and cash equivalents per share: $5.52
- Cash and cash equivalents makes up 8.4% of Neogen's market capital
- Cash and cash equivalents makes up 41.04% of Neogen's total assets
- Accounts receivable: $79.112 million
- Accounts receivable makes up 10.9% of Neogen's total assets
- Stockholders equity of Neogen: $660.306 million
- Stockholders equity per share: $12.53
- Neogen is trading at 5.20 times its stockholders equity which is outside the expected range of between 2 and 4 which most companies tend to trade at.
Neogen's management commentary on the results and earnings guidance
LANSING, Mich., Sept. 24, 2019 — Neogen Corporation (Nasdaq: NEOG) announced today that revenues for the first quarter of its 2020 fiscal year, which ended Aug. 31, were $101,424,000, compared to the previous year’s first quarter revenues of $99,626,000.
“Our first quarter did not meet the overall performance expectations that we have for ourselves. Even considering the difficult international business climate created by the continuing strong U.S. dollar and the U.S. trade issues with China and elsewhere, we must work to produce better results,” said John Adent, Neogen’s president and chief executive officer. “We were, however, pleased with the continued strength of our genomics business, and we are continuing to build upon our core strengths to return to our historic growth rates, while also expanding our capabilities.
“In August, we announced a licensing agreement with Corvium, a leading producer of risk management software for the food safety industry, that will complement our diagnostics business by efficiently providing our customers with the information they need to make rapid data-driven decisions to protect their consumers and businesses,” Adent continued. “We have also continued our genomics laboratory expansions in China, Brazil Canada and the United Kingdom, and are in the beginning stages of an expansion at our flagship operation in Lincoln, Neb., as we work to satisfy the accelerating demand for our genomics services.”
“The first quarter saw a continuation of the adverse currency environment that we experienced in each of the four quarters of our previous fiscal year. In the current quarter, we would have recorded approximately $1.2 million more in revenues in a neutral currency environment,” said Steve Quinlan, Neogen’s chief financial officer. “At the bottom line, we knew we faced a difficult comparison with the prior year quarter’s exceptionally low effective tax rate, which was impacted by the exercise of stock options by company employees. The timing and amount of these exercises will continue to impact the company’s effective rate going forward. But, as shown on our balance sheet, our strong cash position provides great flexibility to continue to invest in our businesses going forward.”
“Our first quarter did not meet the overall performance expectations that we have for ourselves. Even considering the difficult international business climate created by the continuing strong U.S. dollar and the U.S. trade issues with China and elsewhere, we must work to produce better results,” said John Adent, Neogen’s president and chief executive officer. “We were, however, pleased with the continued strength of our genomics business, and we are continuing to build upon our core strengths to return to our historic growth rates, while also expanding our capabilities.
“In August, we announced a licensing agreement with Corvium, a leading producer of risk management software for the food safety industry, that will complement our diagnostics business by efficiently providing our customers with the information they need to make rapid data-driven decisions to protect their consumers and businesses,” Adent continued. “We have also continued our genomics laboratory expansions in China, Brazil Canada and the United Kingdom, and are in the beginning stages of an expansion at our flagship operation in Lincoln, Neb., as we work to satisfy the accelerating demand for our genomics services.”
“The first quarter saw a continuation of the adverse currency environment that we experienced in each of the four quarters of our previous fiscal year. In the current quarter, we would have recorded approximately $1.2 million more in revenues in a neutral currency environment,” said Steve Quinlan, Neogen’s chief financial officer. “At the bottom line, we knew we faced a difficult comparison with the prior year quarter’s exceptionally low effective tax rate, which was impacted by the exercise of stock options by company employees. The timing and amount of these exercises will continue to impact the company’s effective rate going forward. But, as shown on our balance sheet, our strong cash position provides great flexibility to continue to invest in our businesses going forward.”
Neogen Corporation (NASDAQ: NEOG) stock price history
The image below, obtained from Google, shows the stock price history of Neogen (NASDAQ: NEOG) over the last 5 years. And it's been a very good time for Neogen (NASDAQ: NEOG). 5 years ago the stock was trading at around $31 and its currently trading at $65,23. That's a impressive return of 110.4% over the last 5 years. The stock is trading at very close to the midpoint between its 52 week high and its 52 week low. To us its an indication that there is currently no catalyst to drive the company stock up or down. So we see it as sentiment and momentum wards Neogen shares being neutral.
Recent coverage of Neogen Corporation
The extract below shows recent coverage of Neogen as obtained from Zacks
Neogen (NEOG - Free Report) came out with quarterly earnings of $0.28 per share, missing the Zacks Consensus Estimate of $0.29 per share. This compares to earnings of $0.29 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of -3.45%. A quarter ago, it was expected that this maker of medical testing kits would post earnings of $0.28 per share when it actually produced earnings of $0.30, delivering a surprise of 7.14%.
Over the last four quarters, the company has surpassed consensus EPS estimates two times. Neogen, which belongs to the Zacks Medical - Products industry, posted revenues of $101.42 million for the quarter ended August 2019, missing the Zacks Consensus Estimate by 3.47%. This compares to year-ago revenues of $99.63 million. The company has not been able to beat consensus revenue estimates over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.
Read the full article here
Neogen (NEOG - Free Report) came out with quarterly earnings of $0.28 per share, missing the Zacks Consensus Estimate of $0.29 per share. This compares to earnings of $0.29 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of -3.45%. A quarter ago, it was expected that this maker of medical testing kits would post earnings of $0.28 per share when it actually produced earnings of $0.30, delivering a surprise of 7.14%.
Over the last four quarters, the company has surpassed consensus EPS estimates two times. Neogen, which belongs to the Zacks Medical - Products industry, posted revenues of $101.42 million for the quarter ended August 2019, missing the Zacks Consensus Estimate by 3.47%. This compares to year-ago revenues of $99.63 million. The company has not been able to beat consensus revenue estimates over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.
Read the full article here
Neogen Corporation (NASDAQ:NEOG) latest stock valuation
So based on the earnings report of Neogen (NASDAQ: NEOG) what do we value Neogen (NEOG) stock at? Based on their latest earnings report our valuation models provide a target price (full value price) for Neogen Corporation stock at $32.50 a stock. We therefore believe the stock of Neogen Corporation is overvalued.
We would therefore not advise long term fundamental or value investors buy into the stock of Neogen at its current price levels. Rather look to enter the stock of Neogen at least 10% below our target (full value) price of $32.50. So a good entry point into the stock would be around $29.30.
At this point in time we cannot see anything in their current financial results or their shorter term prospects that warrants the current stock price. At their current stock price they are trading at a Price to Earnings ratio (PE) of 58.2 which is extremely high.
We would therefore not advise long term fundamental or value investors buy into the stock of Neogen at its current price levels. Rather look to enter the stock of Neogen at least 10% below our target (full value) price of $32.50. So a good entry point into the stock would be around $29.30.
At this point in time we cannot see anything in their current financial results or their shorter term prospects that warrants the current stock price. At their current stock price they are trading at a Price to Earnings ratio (PE) of 58.2 which is extremely high.