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Is Now The Time To Buy NeoGenomics?

|Includes:NeoGenomics Inc. (NEO)

NeoGenomics, Inc. (NASDAQ: NEO) is a publicly traded company that operates a network of cancer-focused testing laboratories to offer genetic and molecular testing services. The company provides various testing services, including Fluorescence In-Situ Hybridization, Cytogenetics, Flow Cytometry, Molecular testing and Immunohistochemistry. It provides testing services to hospitals, oncologists, pathologists, other clinicians and researchers. The company was founded by MichaelT.Dent on October 29, 1998 and is headquartered in Fort Myers, FL.

Mixed Results Skewed

In the most recent quarter, the company posted revenue of $18.2 million, which is a 16.1 percent increase over first quarter 2013. It is quite impressive given the fact that the company achieved this revenue growth despite a $700,000 reduction in revenue recorded to account for a conservative interpretation of the unresolved National Correct Coding Initiative edits concerning billing Medicare for FISH testing. Nonetheless, the average revenue-per-test declined by 3.8 percent from the first quarter of fiscal 2013 because of the NCCI FISH matter.

The average cost-of-goods-sold-per-test improved by 6.5 percent, which boosted the gross margin to 47.9 percent from 46.3 percent posted the same quarter last year. However, the company's operating expenses increased by 19.8 percent to $8.3 million from last year's $6.9 million of the same quarter. This increase was driven by many factors like the increase in the size of its sales team, increased commission and constant investments in facilities, new test development activities and information technology.

Overall, the company managed to post a net income of $102,000 as compared to the $3,000 the same quarter last year.

The massive growth in net income came despite a slight decrease in EBITDA as the company's adjusted EBITDAfor the quarter stood at $1.7 million, a 2 percent decrease from last year. The company attributed this decline to the revenue squeeze in its NCCI FISH segment.

Is Now the Time to Buy?

Looking at the quarterly results this year, NEO has performed particularly well compared to the same period last year. In recent analyst reports, several analysts initiated coverage on shares of NeoGenomics with a "buy" rating and a $6.00 price target on the stock. Overall, the stock currently has a consensus rating of "buy" and a price target of $6.20.

The company's recent trend appears attractively solid, as it continues to move upwards on the price charts. These mechanisms seem to suggest that it could be an ideal time to buy the stock, especially considering the consensus ratings and recent results.

Conclusion

Neogenomics seems to be moving in the right direction as far as profitability is concerned. Nonetheless, it needs to improve on its cost management in a bid to increase various margins critical to earnings growth.

The company is nearing completion of a $1.2 million overhaul and redesign of its Fort Myers lab. This new laboratory facility will let it to handle higher volumes efficiently, thereby improving operational margins. All these exciting actions have set the stage for a strong 2014 for the company.

The company also issued guidance for the fiscal second quarter recently and expects revenue of about $18.8 to $19.3 million. The bottom line is that NeoGenomics looks strong, both fundamentally and in terms of outlook, and is therefore a great option for investors to evaluate further.

Stocks: NEO