Is Neogen (NEOG) a Mispriced Recovery Story Amid Operational Challenges?

The stock of Neogen Corporation (NEOG) has recently experienced a rebound, sparking debate among investors about whether this reflects a correction of historical undervaluation or an overreaction to short-term operational adjustments. To assess this, we must dissect the interplay between valuation dislocation, strategic operational shifts, and growth potential. Drawing on analyst price targets, price-to-sales (P/S) comparisons, and the company's restructuring efforts, this analysis evaluates whether Neogen represents a compelling mispriced recovery story or a precarious overcorrection.

Valuation Dislocation: A Tale of Contradictions

Neogen's valuation appears to straddle two narratives. On one hand, analyst price targets and intrinsic value estimates suggest significant upside. As of November 2025, the consensus price target stands at $8.83, implying a 22.64% increase from the current stock price of $7.20. This aligns with a broader "Buy" consensus from 2024, where average targets ranged from $6.50 to $10.00. More compelling is the intrinsic value calculation of $9.92 under the Base Case scenario, which indicates a 27% undervaluation relative to the market price.

Conversely, the P/S ratio of 1.8x-well below the US Medical Equipment industry average of 2.9x and peer average of 4.2x-suggests investor skepticism. This discount reflects Neogen's recent revenue declines and ongoing losses, such as the $612.2 million non-cash goodwill impairment charge in Q4 2025 linked to its 3M acquisition. Yet, the low P/S ratio also hints at potential value for investors willing to overlook short-term pain for long-term gains.

Operational Challenges and Strategic Shifts: A Double-Edged Sword

Neogen's operational landscape is marked by both headwinds and transformative initiatives. The company reported a 3.6% year-on-year revenue decline in Q3 2025, with a negative operating margin of -7.7% and free cash flow of -$13.15 million. These challenges are compounded by macroeconomic uncertainty, distributor hesitancy and potential tariff impacts of $30 million.

However, Neogen's leadership under new CEO Mikhael Nassif has prioritized cost optimization and portfolio rationalization. The company aims to achieve $20 million in annualized cost reductions through process improvements, workforce adjustments, and divestitures. A notable example is the sale of its Cleaners & Disinfectants business, which generated a non-cash gain and enabled $100 million in debt repayment. While these moves have temporarily dented adjusted EBITDA and gross margins, they are designed to create a leaner, more focused organization.

The restructuring has not been without pain. Neogen incurred over $50 million in one-time costs during fiscal 2025, and Q3 2025 results showed a 3.4% revenue decline and a drop in Adjusted EBITDA margin to 22.0%. Yet, the updated full-year revenue guidance of $895 million and Adjusted EBITDA of $195 million signals cautious optimism about margin recovery.

Growth Potential: A Path Forward

The question of Neogen's growth potential hinges on its ability to execute its strategic vision while navigating external pressures. Analysts project a 7.3% revenue decline over the next 12 months, but the company's FY2026 guidance of $820–$840 million suggests a potential rebound in the latter half of the year. This optimism is partly driven by core growth in biosecurity and bacterial sanitation products, which partially offset declines in other segments.

Moreover, the intrinsic value calculation of $9.92 and the Guggenheim initiation of coverage with a $15.00 price target (implying a 59% upside) underscore confidence in Neogen's long-term prospects. These estimates assume successful integration of cost-cutting measures and a return to margin expansion. Risks remain, including the sustainability of cost savings and the pace of market recovery in its key segments.

Conclusion: Mispricing or Overcorrection?

Neogen's stock appears to occupy a gray area between undervaluation and overcorrection. The low P/S ratio and analyst price targets suggest the market has discounted its historical struggles but may be underestimating its strategic pivot. The intrinsic value calculation further reinforces the case for a mispriced recovery, particularly if the company can sustain its cost discipline and capitalize on high-potential segments.

Yet, the operational challenges-declining revenue, restructuring costs, and macroeconomic headwinds-cannot be ignored. Investors must weigh the potential for margin recovery against the risk of prolonged underperformance. For those with a medium-term horizon and a tolerance for volatility, Neogen's current valuation may represent an attractive entry point. However, the path to value realization is neither guaranteed nor immediate.

In the end, Neogen's story is one of transformation. Whether it becomes a mispriced recovery success or a cautionary tale depends on its ability to execute its strategic vision and navigate the complex interplay of internal and external forces.