Innodata INOD shares have appreciated 131% year to date (YTD), outperforming the broader Zacks Computer and Technology sector’s appreciation of 27.3%.
INOD shares have also outperformed the Zacks Computer – Services industry and peers, including PDF Solutions PDFS, CSG Systems International CSGS, and Forian FORA.
Over the same timeframe, shares of PDFS, CSGS, and FORA have declined 7.4%, 8.4%, and 27.9%, respectively. The industry has appreciated 18.2% YTD.
INOD shares’ outperformance can be attributed to expanding clientele and increasing customer requirements. In the second quarter of fiscal 2024, Innodata expanded into new Large Language Model (LLM) programs and expansions for a Big Tech Client and was valued at $87.5 million in ARR revenue.
Innodata Inc. Price and Consensus
Innodata Inc. price-consensus-chart | Innodata Inc. Quote
Will Expanding Clientele Expand INOD’s Prospects?
INOD is benefiting from an expanding clientele.
Innodata received two new LLM development programs from one of its existing "Magnificent Seven” Big Tech clients, which is expected to produce $44 million of ARR revenues.
INOD has also expanded contracts with accounts related to Gen AI, healthcare providers, and the insurance underwriting market.
INOD’s AI Innovation Aids Prospects
Innodata aims to integrate GenAI into tech stacks to enable self-organization and decision-making and to train new LLMs to conduct complex tasks with ease. As per McKinsey & Co. report, generative AI will potentially add $2.6 trillion - $4.4 trillion to the global economy by midpoint 2045.
Innodata’s AI-integrated Synodex platform is increasingly being used in areas other than insurance underwriting.
Innodata is leveraging its new GenAI capabilities in Synodex to provide media and news briefs to federal agencies and to support clinical use cases in the healthcare market.
INOD is integrating agility with PR CoPilot, a purpose-built carat AI layer that enables PR professionals to get more done in less time and at lower costs.
Innodata aims to not only develop GenAI foundation models but also to build GenAI-enabled platforms for industries.
INOD’s Earnings Estimates Show Solid Y/Y Growth Prospect
For fiscal 2024, INOD expects revenues to increase 60% to $138.8 million, indicating 60% year-over-year growth.
The Zacks Consensus Estimate for fiscal 2024 revenues is pegged at $136.31 million, indicating year-over-year growth of 57.08%.
For fiscal 2024, the Zacks Consensus Estimate for earnings is pegged at 21 cents per share, unchanged over the past 30 days and indicating year-over-year growth of 800%.
The Zacks Consensus Estimate for third-quarter fiscal 2024 revenues is pegged at $35.47 million, indicating year-over-year growth of 59.99%.
In the third quarter of fiscal 2024, INOD expects adjusted EBITDA to be $8.4 million, indicating 200% year-over-year growth.
The consensus mark for third-quarter fiscal 2024 earnings is currently pegged at 7 cents, unchanged over the past 30 days, and indicating year-over-year growth of 600%.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
What Should Investors Do With INOD Stock?
INOD is suffering from macroeconomic challenges, including persisting inflation, which has resulted in an elongated sales cycle and lower conversion rates.
In the second quarter of fiscal 2024, Innodata’s gross margin and adjusted EBITDA margin were down sequentially as a result of incurring $3.6 million of recruiting agency fees. However, recruiting costs are expected to reduce to approximately $300,000 in the third quarter of fiscal 2024.
INOD stock is not so cheap, as the Value Score of D suggests a stretched valuation at this moment.
In terms of the forward 12-month Price/Earnings ratio, INOD is trading at 36.33X, higher than the Zacks Computer - Services industry’s 19.88X.
INOD currently carries a Zacks Rank #3 (hold), and investors should wait for a more favorable entry point to enter INOD shares.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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