NEO has high potential to convert on fundamental momentum that has garnered speed over the previous 5-10 years into the coming periods. The market discounts NEO shares away from their fair value which is in the region of $95.-. The company has the potential to become a market-leader in oncology diagnostics and overall oncology services, and it is well-positioned to capitalize on widening addressable markets over the next 5 years at least. Given the growth vision, that seems to consolidate a plethora of oncology services and diagnostics under one roof, NEO should remain on track to maintain the cadence of acquisitions and tuck-ins to expand the product offerings within the portfolio, whilst keeping a lid on operating expenses and R&D spend.
There are several risks that must be factored into the investment debate, and although we feel NEO mitigates the majority of these via the business model and market’s view of shares, they still remain present and deserve to be recognized. First, there are pipeline risks that must be considered, including the goal to launch up to 70 new tests per year moving forward. That’s seven-zero. It’s a phenomenal feat and requires utmost diligence and dedication to converting this number to market. Additionally, there runs the risk that future acquisitions may not integrate successfully and that the company may actually have to pay a premium to close transactions for high-quality names. Moreover, there are execution risks that the company may lose some of its market positioning as an oncology leader and that the plan to consolidate as a full house of oncology services may fail to be as successful as planned