Assessing Neogen (NEOG) Valuation After Recent Share Price Momentum And Mixed Longer Term Returns

Neogen (NEOG) has attracted fresh attention after recent share price moves, with the stock closing at US$9.35 and showing mixed return patterns across the past year and the past 3 months.

See our latest analysis for Neogen.

The recent 30 day share price return of 29.86% and 90 day share price return of 52.28% contrast with a 1 year total shareholder return decline of 20.36%. This suggests short term momentum has picked up while longer term holders have still faced weaker outcomes.

If Neogen's rebound has caught your eye, it could be a moment to broaden your watchlist with other healthcare names using our healthcare stocks.

With Neogen trading at US$9.35, showing a large intrinsic discount estimate and a lower price than some analyst targets, the key question is simple: is there real value left on the table or is the market already pricing in future growth?

Price to Sales of 2.3x: Is it justified?

Neogen's P/S ratio of 2.3x at a last close of US$9.35 screens as mixed value, looking attractive against peers but rich versus its own fair ratio.

P/S compares the market value of the company to its revenue, which can be useful for loss making healthcare names where earnings are not yet a clean guide. For Neogen, this highlights how much investors are currently paying for each dollar of its US$880.3m in revenue while the business remains unprofitable.

According to the SWS framework, Neogen's current P/S of 2.3x sits above an estimated fair P/S of 1.2x. The market could move toward this level if sentiment or expectations cool. That implies the shares screen expensive on this measure even though they look cheaper than the US Medical Equipment industry average of 3.4x and the peer group average of 4.1x, where Neogen trades at a clear discount.

Explore the SWS fair ratio for Neogen

Result: Price to Sales of 2.3x (OVERVALUED)

However, the company is still loss making, with net income of US$602.739m in the red, and longer term total returns over 3 and 5 years remain weak.

Find out about the key risks to this Neogen narrative.

Another View: What Our DCF Model Suggests

While the 2.3x P/S ratio appears expensive compared to Neogen's 1.2x fair ratio, our DCF model points in a different direction, with an estimated fair value of US$25.34 versus the current US$9.35. One tool signals caution, while the other indicates a large discount, so which signal matters more to you?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Neogen for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 874 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Neogen Narrative

If this view does not quite fit how you see Neogen, or you would rather rely on your own work, you can build a custom thesis in just a few minutes with Do it your way.

A great starting point for your Neogen research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

Looking for more investment ideas?

If Neogen is on your radar, do not stop there. Broaden your opportunity set now so you are not relying on a single story.

• Spot potential bargains by scanning these 874 undervalued stocks based on cash flows that may be trading below what their cash flows suggest they are worth.
• Ride powerful tech trends by checking out these 23 AI penny stocks that are tied to artificial intelligence themes.
• Put income at the center of your plan by focusing on these 13 dividend stocks with yields > 3% that yield more than 3%.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com