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Gauging NeoGenomics’ Risk Factors Post Q2 Results
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Gauging NeoGenomics’ Risk Factors Post Q2 Results

NeoGenomics, Inc. (NEO) provides cancer-focused testing globally. Operating via two segments, Clinical and Pharma Services, the company caters to hospitals, reference labs, pathologists, oncologists, clinicians and pharmaceutical firms. It has a presence in the U.S., Europe, and Asia.

Recently, NeoGenomics delivered robust Q2 numbers on both top-line and bottom-line fronts.

Let’s take a look at the financial performance of the company and see what has changed in its key risk factors that investors should know.

On the back of 37% growth in Clinical Services and 50% in Pharma Services, NeoGenomics’ Q2 revenue surged 40% year-over-year to $122 million, beating estimates by $3.73 million. Higher test volume and revenue per test in Clinical Services, along with increased revenue associated with clinical trials and informatics in Pharma Services segment, acted as catalysts.

Net loss per share of the company narrowed to $0.01 from $0.04 a year ago and beat consensus by $0.05. (See NeoGenomics’ stock charts on TipRanks)

Additionally, NeoGenomics reiterated its fiscal 2021 outlook. The company estimates 2021 revenue to be in the range of $490 million to $510 million. Further, it estimates adjusted EBITDA to be in the range of $10 million to $15 million.

In response to the Q2 performance, Needham analyst Michael Matson, on August 6, reiterated a Buy rating on the stock with a price target of $55, implying 28.4% upside potential.

Matson said, “Following a resolution to the COVID-19 pandemic, we believe NeoGenomics will benefit from positive secular growth associated with the personalization of cancer treatment based upon the stratification of cancer subtypes through the use of genetic signatures and protein biomarkers.”

Based on 6 unanimous Buys, consensus on the Street is a Strong Buy. The average NeoGenomics price target of $57 implies 33% upside potential. Shares are down 21.7% so far this year.

Now, let’s look at what has changed in the company’s key risk factors.

According to the new Tipranks’ Risk Factors tool, NeoGenomics’ main risk category is Legal & Regulatory, which accounts for 30% of the total 44 risks identified. Since June, the company has added two key risk factors.

NeoGenomics closed two acquisitions recently. It acquired Trapelo Health in April and Inivata in June. The two new risk factors are related to these acquisitions.

Under the Finance & Corporate category, the company highlights that it is in the process of migrating the operations of Trapelo and Inivata to its own internal controls system. NeoGenomics may face delays or difficulties in making changes or necessary improvements to its internal controls and accounting systems. Further, NeoGenomics may have to devote significant resources to implement additional procedures and improved controls which, in turn, could affect its business, operations or financial condition, and stock price.

Under the Legal & regulatory category, NeoGenomics highlights that Trapelo and Inivata may have liabilities and unasserted claims that are not known, probable, or estimable at present. If NeoGenomics learns of additional information about Trapelo and Inivata that could adversely affect Neogenomics then it could have a material adverse impact on the company’s business.

The Legal & Regulatory risk factor’s sector average is at 21%, compared to Neogenomics’ 30%.

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