Neogen Corporation and the Implications of the Ongoing Class Action Lawsuit

Neogen Corporation (NASDAQ: NEOG) is embroiled in a high-stakes class action lawsuit that could redefine its financial trajectory. Investors who purchased shares between January 5, 2023, and June 3, 2025, are alleging that the company and its executives misled them by downplaying the challenges of integrating the 3M Food Safety Division and underreporting the financial toll of these inefficiencies [3]. This legal storm, coupled with a series of earnings disappointments, has sent the stock reeling—a 67% drop over the past year as of September 2025 [4]. For investors, the question is no longer just about Neogen’s core business but about the compounding risks of litigation, liquidity strain, and valuation uncertainty.

The Financial Fallout: A Perfect Storm of Missteps

Neogen’s troubles began in earnest in January 2025, when it disclosed a $461 million non-cash goodwill impairment charge tied to its 2022 acquisition of the 3M division. This revelation, coupled with a cut in full-year revenue and EBITDA guidance, triggered a 5% stock price drop [1]. The company’s woes deepened in April 2025, when it reported a 3.4% quarterly revenue decline and announced its CEO’s resignation, sending shares plunging 28% to $5.02 [4]. By June, Neogen projected EBITDA margins would fall to the high teens from 22%, prompting another 17% decline [5]. These cascading losses have left the stock trading at $5.75 as of September 5, 2025, despite a 10.66% four-week rally [4].

The financial damage extends beyond the stock price. Neogen’s Q4 2025 results revealed a $598 million goodwill impairment charge and a net loss of $612 million, driven by a 4.8% revenue decline and a 18.0% EBITDA margin [1]. For context, the company’s adjusted EBITDA margin had stood at 23% just a year prior. These numbers underscore a business struggling to absorb the integration costs of the 3M division, which now loom as a drag on profitability.

Legal Risks: A Pending Liability with No Clear Cap

The class action lawsuit, which accuses Neogen of securities fraud, adds another layer of risk. According to a report by Bragar Eagel & Squire, P.C., the lawsuit alleges that the company concealed material weaknesses in its internal controls and integration strategy, misleading investors about its financial health [5]. While the potential settlement amount remains undisclosed, the sheer scale of the stock price collapses—particularly the 28% drop in April—suggests a liability that could run into the hundreds of millions.

Compounding the problem is the absence of public information about Neogen’s legal reserves or insurance coverage. Most companies set aside funds for litigation, but without transparency, investors are left to speculate whether Neogen can afford a large payout without further straining its liquidity. As of Q4 2025, the company’s cash flow appears constrained, with adjusted EBITDA of $40.6 million and a net loss of $612 million [1]. A significant legal settlement could force Neogen to tap into debt or dilute shareholders, both of which would weigh on long-term valuation.

Valuation Metrics: A P/E Ratio That Doesn’t Tell the Whole Story

Neogen’s forward P/E ratio of 23.47 suggests a modest premium to the market, but this metric ignores the company’s volatile earnings and legal uncertainties [4]. The missing PEG ratio—a gauge of valuation relative to earnings growth—reflects the lack of consensus about Neogen’s future prospects. Analysts project a stock price of $4.99 by year-end and $4.71 in 12 months, implying further downside [4]. These forecasts assume the lawsuit is resolved without a catastrophic payout, a scenario that seems increasingly uncertain as the lead plaintiff deadline of September 16, 2025, approaches [3].

Investor Strategy: Navigating the Risks

For long-term investors, Neogen’s stock carries a high degree of risk. The company’s core business—food and animal safety testing—remains resilient, but the integration of the 3M division has become a black hole for value. Short-term traders might find opportunities in volatility, but the legal and financial headwinds make this a high-stakes bet.

The key takeaway is that Neogen’s stock is now a function of its litigation outcomes. Until the lawsuit is resolved, the stock will remain a speculative play. Investors should monitor two critical dates: the lead plaintiff deadline on September 16 and the expected resolution of the case, which could take 12–18 months. In the interim, the stock is likely to remain range-bound between $4.50 and $6.00, with downward bias if new legal or financial disclosures emerge.

Conclusion

Neogen’s story is a cautionary tale of overreaching acquisitions and poor integration. The class action lawsuit has exposed the company’s vulnerabilities, and while its core business has intrinsic value, the legal and financial risks are too significant to ignore. For now, the stock is a high-risk, high-reward proposition—suitable only for those with a stomach for uncertainty and a clear exit strategy.

**Source:[1] Neogen Announces Third-Quarter 2025 Results [https://www.neogen.com/en/neocenter/press-releases/neogen-announces-third-quarter-2025-results/][2] Neogen Corporation Q3 2025 Financial Results [https://www.tradingview.com/news/tradingview:505442cb79c9e:0-neogen-corporation-q3-2025-financial-results/][3] Neogen Corporation (NEOG) Investors Who Lost Money... [https://www.rgrdlaw.com/cases-neogen-corporation.html][4] Neogen | NEOG - Stock Price | Live Quote | Historical Chart [https://tradingeconomics.com/neog:us][5] Neogen Corporation (NEOG) Investors Who Lost Money... [https://www.gurufocus.com/news/3095323/neogen-corporation-neog-investors-who-lost-money-have-opportunity-to-lead-securities-fraud-lawsuit]