Over the next 6 years, Inotiv shares will need to reach $11 to achieve average annual stock market performance of 9.0%. Inotiv’s stock price will need to reach $13 by 2029 to achieve upper quartile performance. What is the market’s view of Inotiv’s future operating performance as reflected in the current price of $6?
Executive Summary
- Inotiv’s important characteristics: high expected growth, high financial strength, very low profitability, and low stability. A big positive influence on Inotiv’s valuation is its superior Growth.
- Low valuation, lagging shareholder returns. Current valuation levels are below average relative to the Inotiv Peer Group. Recent market returns have substantially underperformed the Inotiv Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, Inotiv shares should reach a level of $274 by 2029 — an 87.0% per year total shareholder return. A 2029 stock price of $11 would reflect median performance and a price of $13 would be required to reach upper quartile performance.
- Growth has been Inotiv’s biggest valuation strength. Historical growth has been very high relative to the Inotiv Peer Group and forecasted growth is relatively very high. Equity Growth, Revenue Growth, and Asset Growth have been superior. EPS Growth has lagged. Inotiv’s historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has fallen short of equity growth driving erosion in return on equity.
- Asset Turnover, Return on Equity, Pretax Margin, and Pretax ROA are all group lagging. These factors have negatively affected market perceptions of Inotiv. The company has very low cash and will have to work to generate attractive investments and improve valuation.
- Inotiv’s risk profile is neutral. Overall variability has been very high with very high revenue variability, above average E.P.S. variability, and very high stock price volatility. Financial Strength is relatively high and earnings’ expectations are relatively very high. The debt/capital ratio has declined.
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