Thursday, January 24, 2019

Neogen Pressured On Trade Tensions, But Still Well-Loved

A lot of what you need to know about Neogen (NASDAQ:NEOG) can be summed up thusly - after a nearly 25% pullback from the 52-week on tariff-related headwinds, the shares still aren't even close to undervalued by any conventional valuation approach. As I've said in the past, Neogen shares live in their own world where valuation is concerned, as institutions (over 90% of the ownership base is institutional) seem to be valuation-insensitive when it comes to owning a pure-play on food safety and food/production animal care.

I don't think the headwinds that Neogen is seeing today are going to last indefinitely, and there are significant long-term growth opportunities in both genomic testing and in emerging markets like Brazil and India. I can't get comfortable with the valuation, but if the U.S. and China find a way to make peace on trade, these shares should regain some momentum in 2019.

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Neogen Pressured On Trade Tensions, But Still Well-Loved

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