NEOG

After 70% Stock Collapse, Neogen ($NEOG) Insiders from CEO to Directors Go 'All In' with Cluster Buying

04/24/2025 02:27

Following a dramatic stock price collapse, Neogen Corporation ($NEOG) executives and board members have collectively stepped up to purchase company shares, drawing significant market attention. The food and animal safety diagnostics solution provider has seen its stock plummet in recent months, with a particularly shocking 29% single-day drop on April 9th after reporting quarterly results that fell short of expectations. On April 9th, Neogen announced adjusted earnings of 10 cents per share for the quarter ended February 28, below both the prior year's 12 cents and analysts' forecasts of 11 cents. Revenue also declined by 3.4% to $220.98 million, missing projections of $224.88 million. Following this announcement, the stock price crashed from $7.04 to $5.02 and currently trades below $5 in late April. What's particularly noteworthy is the executive response to this steep decline. The day after the price collapse, on April 10th, Chief Accounting Officer John Patrick Moylan purchased 10,000 shares at an average price of $5.07, representing a total investment of $50,700. This was just the beginning. A week later, on April 22nd, three directors simultaneously participated in share purchases. Director Rafael Rodriguez acquired 7,474 shares at $4.59, Director James Tobin bought 10,000 shares at $4.73, and Director Jeffrey Capello purchased 20,712 shares at $4.84. The combined purchase amount totaled approximately $180,000. The buying spree didn't end there. The following day, April 23rd, Chief Legal Officer Amy Rocklin invested $62,375 to acquire 12,500 shares at $4.99. These recent purchases actually continue a pattern of insider buying that began earlier this year. On January 16th, CEO John Edward Adent and CFO David Naemura purchased 23,035 shares (at $11.03, $254,076) and 14,800 shares (at $11.11, $164,428) respectively, also during a period when the stock was trending downward. Going back further, CEO Adent had previously acquired 14,500 shares at $13.80 on October 11, 2024. This insider buying activity demonstrates more than just a vote of confidence; it reveals a notable pattern. Particularly, the phenomenon known as 'cluster buying,' where multiple insiders purchase shares within a short timeframe, is often interpreted as a signal of potential stock recovery. Moreover, these purchases weren't token investments but represented significant commitments of personal capital by the company's leadership team. The context for this insider buying includes both financial challenges and strategic shifts at Neogen. The company has struggled with performance in recent quarters, reporting a net loss of $10.96 million in the third quarter of fiscal 2025. However, on April 21st, Neogen announced the sale of its global cleaners and disinfectants business to Kersia Group for $130 million, a strategic decision apparently aimed at allowing the company to focus more on its core food safety diagnostics business. CEO John Adent commented on the divestiture, stating, "This transaction allows Neogen to focus more intensely on food safety diagnostics and will contribute to improved profitability over the long term." The proceeds are expected to be used primarily to repay a $100 million credit facility, part of the company's debt reduction efforts. Financially, while Neogen carries substantial debt of approximately $900 million, it maintained about $127.7 million in cash as of the end of February and has a healthy current ratio of 3.91, indicating relatively stable short-term financial health. Additionally, the price-to-book (P/B) ratio of 0.40 suggests the company is trading below its book value, which could be an attractive valuation factor. However, investors should also consider the risk factors. The company has revised its annual guidance downward, projecting fiscal 2025 revenue of approximately $895 million and adjusted EBITDA of around $195 million. Analysts forecast an average revenue growth rate of 2.5% per annum over the next three years, which falls below the medical equipment industry average of 7.8%. Taken together, Neogen's recent insider buying pattern suggests that management believes the current stock price significantly undervalues the company's true worth. The 'cluster buying' pattern, with purchases from the CEO down through various executives and board members, sends a strong signal of internal confidence in the company's future. Nevertheless, investors should weigh this against the challenges of recent performance issues and slower-than-industry growth projections. How effectively Neogen can improve profitability and return to a growth trajectory through business realignment and non-core asset sales will likely be the key to any stock recovery.

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