3 Reasons to Avoid NEO and 1 Stock to Buy Instead

3 Reasons to Avoid NEO and 1 Stock to Buy Instead

Petr Huřťák

Thu, February 26, 2026 at 10:43 PM GMT+9 3 min read

In this article:

NEO

+1.76%

What a fantastic six months it’s been for NeoGenomics. Shares of the company have skyrocketed 48.3%, hitting $9.94. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Is there a buying opportunity in NeoGenomics, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Do We Think NeoGenomics Will Underperform?

We’re happy investors have made money, but we’re cautious about NeoGenomics. Here are three reasons there are better opportunities than NEO and a stock we’d rather own.

1. EPS Trending Down

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Sadly for NeoGenomics, its EPS declined by 3% annually over the last five years while its revenue grew by 10.4%. This tells us the company became less profitable on a per-share basis as it expanded.

NeoGenomics Trailing 12-Month EPS (Non-GAAP)

2. Previous Growth Initiatives Have Lost Money

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

NeoGenomics’s five-year average ROIC was negative 10.5%, meaning management lost money while trying to expand the business. Its returns were among the worst in the healthcare sector.

NeoGenomics Trailing 12-Month Return On Invested Capital

3. High Debt Levels Increase Risk

Debt is a tool that can boost company returns but presents risks if used irresponsibly. As long-term investors, we aim to avoid companies taking excessive advantage of this instrument because it could lead to insolvency.

NeoGenomics’s $409.5 million of debt exceeds the $159.6 million of cash on its balance sheet. Furthermore, its 6× net-debt-to-EBITDA ratio (based on its EBITDA of $43.36 million over the last 12 months) shows the company is overleveraged.

NeoGenomics Net Debt Position

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. NeoGenomics could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope NeoGenomics can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

Final Judgment

We see the value of companies making people healthier, but in the case of NeoGenomics, we’re out. After the recent rally, the stock trades at 57× forward P/E (or $9.94 per share). At this valuation, there’s a lot of good news priced in - we think there are better stocks to buy right now. We’d recommend looking at our favorite semiconductor picks and shovels play.

Story Continues  

Stocks We Would Buy Instead of NeoGenomics

Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.

The names generating the next wave of massive growth are right here in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.

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