Food- and animal-safety product manufacturer Neogen (NASDAQ:NEOG) will file second-quarter 2007 earnings on Jan. 4. So you're not barking up the wrong tree, the Fool provides this glimpse of whether the company will clean up.

What analysts say:

  • Buy, sell, or waffle? The two analysts covering Neogen agree: This stock is a buy.
  • Revenues. Revenues are expected to jump 24% to $22.6 million, up from the $18.3 million the year before.
  • Earnings. Profits, however, are expected to come in at a slightly less tasty 8% higher, or $0.28 per share.

What management says:
Neogen has been a leader in selling diagnostic tests that detect the presence of food-borne bacteria and allergens present in food. On the pet-safety side, it sells hundreds of products and instruments to veterinarians for administering vaccines and antibiotics in precise amounts. And while analysts have a generous view of revenues, the second quarter last year was helped by increased sales of rodenticides to control a large influx of voles (meadow mice) in the Pacific Northwest. It was also helped by a large increase in over-the-counter sales of veterinary products. Repeating that performance won't be easy.

What management does:
Margins have been steadily improving across the board lately, though last quarter, the company did experience one step backward as Neogen came up against those tough year-over-year comparisons. Even so, since it's expected that the company will again be profitable this quarter, it will mark the 55th consecutive quarter of profitability. While it seems that the company will end its streak of profit growth in excess of 20% -- that's been happening for six quarters straight -- it looks as though sales will continue to exceed the $20 million-per-quarter mark for the foreseeable future.

Margin %

08/05

11/05

02/06

05/06

08/06

Gross

49.7

50.9

50.9

51.1

50.7

Op.

14.7

15.9

16.2

16.6

16.9

Net

9.8

10.5

10.6

11.0

11.0
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Despite its leadership and innovative position in the market, Neogen sells at a discount to the competition and the industry. Over the past five years, the food-safety market has more than doubled in size to $1.6 billion, and it's expected to grow at a 5.5% clip through 2010. Worldwide sales of animal-safety products are around $14 billion. Neogen has been expanding its presence internationally, though it targets just a subset of those markets. With a market cap of just $204 million and trailing revenues of $75 million (expected to grow 16% annually), there is plenty of room yet for this dog-and-pony show to grow.

Competitors:

  • IDEXX Labs (NASDAQ:IDXX)
  • Abaxis (NASDAQ:ABAX)
  • Heska (NASDAQ:HSKA)
  • Strategic Diagnostics (NASDAQ:SDIX)

For related Foolishness:

Neogen carries a five-star rating on Motley Fool CAPS. What do investors there know that you don't? Join today to add your voice to the Fool's new stock-rating community. After all, it's completely free!

Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.