Accounting Is Not the Only Risk at Neogen (NEOG)
Despite the stock price decline, risks still abound
The market has not been kind to NEOG over the last couple of years. The company’s stock has been slammed from $46 at the start of 2022 to $14 now. However, it is also far from cheap at almost 30 times forward adjusted EPS of 50 cents despite a debt level that is 4 times adjusted forward EBITDA coupled with negative free cash flow. NEOG also loves its acquisitions. Its merger with 3M’s Food Safety unit in September 2022 is its highest profile deal, but it is by no means its only one- the company completed 19 acquisitions between 2015-2023.
Our review of the company turned up several operating model and accounting policy risks, including a material weakness related to its internal controls that has been ongoing since May 2023. Investors looking for a bargain after the price decline would do well to take these risks into account.
Let’s get behind the numbers…
(Contact behindthenumbers@btnresearch.com for questions regarding our institutional research service.)