As the unfortunate news surrounding the recent disease outbreaks related to foods originating from unclear but disregarded care of products, such pessimism regarding the issue can be reversed when understanding the positive fundamentals involved. When such a situation occurs, there is always going to be more money spent on products and services to help avoid more disasters of the sort then originally has be consumed. Such can be labeled as an ideal foundation for a company involved in testing for abnormal and potentially dangerous areas of consumer food products. The company I have selected, Neogen (NEOG), not only can be supported as a strong buy because of the relative outbreak, but creates even more optimism with the use of fundamental and technical analysis.
From the research I have done, there is some confusion over Neogen’s rivals. From my point of view, it can be agreeable that this company has a strong control over others in its services as it specifically pinpoints the area of developing products for this food administration. Another company, Idexx Laboratories, does have a slightly similar match relative to the profile illustrated by Yahoo Finance, but even if there is some close juxtaposition, the fundamentals Neogen provides are more than marginally superior to the ones of Idexx. Examining the top line, Neogen has seen growth in terms of revenue for at least the past two years which is undeniably evident with a 15% growth rate over the past year. In addition, with expenses being held under control relative to monetary input, net income has provided Neogen with more cash (34% more than last year) to invest into even more capital and research, providing more products which, are not only superior to other companies, but have the power to support a stronger control over these unfortunate food disease outbreaks. With operating income nearly doubling year over year, the only real concern I have about Neogen regarding its fundamentals can be related to its dramatic increase in liabilities since last year. Nevertheless, current assets have continued to grow at a more rapid pace, and the current ratio remains stronger than may have originally been thought of. Furthermore, to add to the optimism, Neogen has a strong P/E ratio of about 24. While comparable to competitor Idexx’s multiple of 30, looking forward, the ratio of Neogen seems to decline to approximately 17 while Idexx’s multiple only falls marginally. In addition, to add to the superiority of Neogen, Idexx, while continuing to have strong revenue growth, has actually seen its cash flow margins decrease since last year. With more contemporary capital needed in relation to the current outbreak problem, while much may have been spent on investments previously, Neogen now has the upper hand in determining new products to focus on in relation to the past four months. Therefore, the fundamentals illustrated support the strong value I have for this healthcare corporation.
When examining the charts using a form of technical analysis, I have seemed to figure out a pattern over the past year with some evidential support. From the current trends of stalemate when the share price bounces between various support and resistance levels, the consensus for most of the time indicates that if the share price is to hit the resistance level more frequently than the support level during this time of stalemate, then the share price is more inclined to decline to a new limited area until the next round of fluctuations. The same can be true if the share price tends to hit the support level more often than the resistance level which will usually indicate a future rally. To support such a claim, I have come with evidence from January to March, illustrating the increased support bounce and from March to May, illustrating the increased resistance bounce. From early January to mid-March, the share price had fluctuated between a resistance level of near 23 and a support level of about 22. However, the share price would reach the resistance level in a very slow and abated volatile manner relative to the doubled support level hits. As a result, near the middle of March, the share price rose nearly two points from its support share price value. In addition, from the middle of March to about the middle of May, with a support level of 23 and a resistance level of 24.50, the share price tended to try and hit the resistance level more often than the support level, and thus, with the continued failed puncturing of the 24.50 mark, the share price gave up and fell on relatively high volume. Consequently, currently, as the share price tends to be dragging along on the support level of 20 more often than the resistance level of 21, now would be a great opportunity to purchase shares of this company to increase your gains for the short term. In addition, I would advise following this pattern for short term investors to accumulate the most capital juxtaposed to investing elsewhere. Thus, while such information may not be of great use to long term investors, the technical analysis provided stimulates a more positive sentiment into investing into this company for the short run.
Therefore, as the recent food outbreak provides an ironic positive opportunity for this company, with both strong fundamentals and a favorable chart pattern, an investment in Neogen will be beneficial for both long term and short term investors. As the company will release its quarterly results early next month, now, especially with the technical indications, may be the best opportunity to maximize your capital gains, regardless of your investing nature.