On Wednesday, Lake Street Capital Markets adjusted its outlook on shares of Inotiv Inc. (NASDAQ: NOTV), increasing the price target to $6.00 from the previous $4.00, while sustaining a Buy rating on the stock. The company's shares, currently trading at $4.19, have shown remarkable momentum with a 128% surge over the past six months.
According to InvestingPro data, the stock has demonstrated strong recent performance, though it remains significantly below its 52-week high of $11.42. The firm acknowledged the commencement of a robust recovery for Inotiv, noting that the fourth fiscal quarter results were strong.
The adjusted earnings before interest, taxes, depreciation, and amortization (AEBITDA) were reportedly understated due to the necessity for Inotiv to offload high-cost non-human primates (NHPs) at today's average selling prices, which have seen a year-over-year decrease of 33%.
The firm highlighted several areas contributing to Inotiv's solid performance, including NHP colony management, operations in the European Union and United Kingdom (TADAWUL:4280) regarding research model services (RMS), and the sales of diet and bedding products.
With a market capitalization of $109 million and annual revenue of $501 million, Inotiv faces challenges managing its substantial debt burden, with a debt-to-equity ratio of 2.36. InvestingPro subscribers can access 12 additional key insights about Inotiv's financial position and market performance.
Lake Street Capital Markets anticipates that stability in these sectors, alongside the continued recovery in NHPs—with the majority of the business contracted in fiscal year 2025—and development in discovery services and analysis (DSA), will lead to revenue growth. They forecast a 6% year-over-year increase in revenue for fiscal year 2025.
Moreover, Lake Street Capital Markets predicts gross margin expansion by 300 basis points and a significant rebound in AEBITDA, projecting a 140% year-over-year increase for fiscal year 2025. Current gross margin stands at 22.6%, while EBITDA reached $19 million in the last twelve months.
For deeper insights into Inotiv's financial health and detailed analysis, investors can access the comprehensive Pro Research Report available on InvestingPro, which provides expert analysis on what really matters for this stock. This is expected to set the stage for Inotiv to return to double-digit AEBITDA margins by fiscal year 2026, with an estimate of 13%.
The firm also expressed confidence that Inotiv will maintain compliance with financial covenants and successfully manage its debt, leading to eventual de-leveraging, given the business's stability. The revised price target reflects the firm's optimism about Inotiv's future financial performance and recovery trajectory.
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