Some companies blow the doors off with sales growth. Neogen (NASDAQ:NEOG) isn't one of them, but the food and animal testing solutions company consistently grows sales 5% to 10% and has developed a knack for making small acquisitions that continue that growth.

It's hard to argue with Neogen's second-quarter performance, but there are a few points of concern. On the positive side, sales were up a solid 6.6%, buoyed by improvements the company made in its cost of goods sold and administrative expenses. Neogen achieved this growth despite the fact that $500,000 of its international sales from last year's second quarter were pushed into this year's third and fourth quarters. Assuming those sales had taken place this quarter, overall sales would have been 2.7% higher. Investors will want to keep an eye on the sales numbers because, while cost control and efficiency gains are good, they only go so far. A company with a price-to-earnings multiple approaching 30 will likely need more than 5% to 10% sales gains to support its valuation.

I don't want to seem like I'm knocking the company's efficiency gains, because they are impressive. Gross margins improved to 52% from 47.2% a year ago, and operating margins improved to 18.3% from 13.9%. The efficiency gains allowed the company to grow net income and diluted earnings per share by 32% and 30%, respectively, which far exceeded sales growth.

However, based on some of the balance-sheet data Neogen provides in its press release, the operating cash flow performance looks like it was a bit weaker, because working capital needs increased. On the earnings conference call, CEO James Herbert attributed the rise in working capital to international sales, which have longer collection terms and slightly higher inventory levels, both of which the company hopes to improve.

Overall, Neogen seems to be doing well as both its animal safety and food safety businesses are growing despite competition from IDEXX Laboratories (NASDAQ:IDXX) and Strategic Diagnostics (NASDAQ:SDIXE). There is also the possibility that as China's market for food and animal testing develops, Neogen might see some of that business. However, that likely will be a gradual development that plays out over a number of years, and investors shouldn't get their hopes up yet. Bottom line: Neogen is an attractively positioned business, but its shares sport a price tag that's just a bit too high to interest me right now.

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Nathan Parmelee has no financial stake in any of the companies mentioned. The Motley Fool has an ironclad disclosure policy.