Hi Brain and Gary,
I've been in this stock since 1993. It's a company with great products for diagnostic testing. Their Q earnings have fluctuated based on outside factors, such as the midwest floods of 1994 (3?5? the years seem to blurring) where almost all of the wheat needed to be tested for something like vomitoxin residue and they sold a huge number of kits to the USDA. USDA was so impressed that Neogen currently has the only such test kit endorsed by them (last I remember). The also sell kits to nut farmers. The bulk of their sales are to farmers and food processors, not currently to restraunts but that should come online in 1997 as you've indicated.
They have other business lines, such as verternary instruments, but I think their biggest growth opportunity is in the biological testing business.
In addition to the secondary offering, there was also a recent dip in the stock price because a wire service published a report linking them with Neogen Industries (I think, the first name was the same though), which is the company which just agreed to produce RU-486 in the US. NEOG has no relation to this other company, and the wire service issued a correction; the stock took a hit anyway because of the confusion. Look at it as a buying opportunity below 7.
The bottom line hasn't been skyrocketing because the board insists on allocating ~10% of revenue to R&D. Read this as "long term hold". The company was started by a few Agricultural and Pharmacutical Professors from Michigan State University, and they aren't about to give up their research budgets. As these new markets open, watch for increased profits, there is a limit to how much absolute money they can reasonably spend on R&D. Estimates are for 0.25 for FY97 (from the company), and that includes the restructuring charge. Note that NEOGs FY ends May 31, to coincide with the growing seaon.
I am very positive on this company.
For more info, see neogen.com
Regards,
Rich |
