Innodata (INOD) AI Stock Analysis

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Innodata

(NASDAQ:INOD)

Rating:73Outperform

Price Target:

$41.00

▲(2.63%Upside)

Innodata's strong financial performance and positive earnings call are major strengths, driving the stock's score. However, technical analysis points to potential short-term challenges, and the high valuation could limit immediate upside. The strategic focus on AI and solid financials support long-term growth potential.

Positive Factors

Customer Expansion

Management is expanding with new and existing customers and broadening solutions, which should add recurring revenue.

Revenue Growth

Innodata reported 1Q25 results with revenue of $58.3M, up 120% year-over-year, topping estimates and consensus.

Negative Factors

Guidance Concerns

INOD only reiterating guidance has drawn ire from speculators while the fundamentals of the business have improved.

Revenue Concentration

INOD's revenue growth has been predominantly from one customer. This should begin to change in 2025 as more companies ramp their development of A.I.

Innodata (INOD) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$1.16B

Dividend YieldN/A

Average Volume (3M)1.74M

Price to Earnings (P/E)35.1

Beta (1Y)3.36

Revenue Growth114.21%

EPS Growth1471.86%

CountryUS

Employees6,597

SectorTechnology

Sector Strength77

IndustryInformation Technology Services

Share Statistics

EPS (TTM)0.22

Shares Outstanding31,745,310

10 Day Avg. Volume1,840,569

30 Day Avg. Volume1,741,750

Financial Highlights & Ratios

PEG Ratio0.89

Price to Book (P/B)16.38

Price to Sales (P/S)0.00

P/FCF Ratio40.30

Enterprise Value/Market Cap0.91

Enterprise Value/Revenue2.07

Enterprise Value/Gross Profit-3.28

Enterprise Value/Ebitda-0.96

Forecast

1Y Price Target

$69.00

Price Target Upside72.72% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering4

Innodata Business Overview & Revenue Model

Company DescriptionInnodata Inc. (INOD) is a global digital services and solutions provider, specializing in data engineering, data analytics, and digital transformation services. The company operates across various sectors including publishing, financial services, legal, and healthcare, offering innovative solutions that enable businesses to harness the power of their data for improved decision-making and operational efficiency. Innodata's core services include data annotation, content enrichment, machine learning, and artificial intelligence model training.

How the Company Makes MoneyInnodata makes money primarily through offering its specialized data services and digital transformation solutions to businesses across multiple industries. The company generates revenue by providing data engineering services, including data annotation and content enrichment, which are crucial for businesses looking to leverage machine learning and AI technologies. Additionally, Innodata offers subscription-based services and project-based engagements, catering to specific client needs in sectors such as publishing and healthcare. Key revenue streams include recurring contracts with clients for ongoing data management and analytics services, as well as partnerships with technology firms that integrate Innodata's solutions into broader digital transformation projects. The company's success is significantly bolstered by its ability to customize its offerings to meet the unique requirements of each client, thereby establishing long-term relationships and recurring revenue opportunities.

Innodata Key Performance Indicators (KPIs)

Any

Adjusted EBITDA by Segment

Adjusted EBITDA by Segment
Reflects the earnings from each segment after adjusting for non-operating expenses, offering a clearer view of operational performance and cash flow potential.

Chart InsightsInnodata's DDS segment has shown a remarkable turnaround, with a dramatic increase in adjusted EBITDA, driven by strategic growth in AI solutions and new customer wins. The Synodex segment, while improving, remains volatile. Agility has shifted from losses to consistent gains. The recent earnings call highlights a 236% year-over-year EBITDA increase, underpinned by AI-driven initiatives. However, potential revenue volatility and margin impacts from strategic investments could pose short-term challenges. The company's confidence in achieving robust revenue growth through innovation and market expansion remains strong.

Data provided by:

Main Street Data

Innodata Earnings Call Summary

Earnings Call Date:May 08, 2025

(Q1-2025)

% Change Since: -2.82%|

Next Earnings Date:Aug 07, 2025

Earnings Call Sentiment Positive

The earnings call highlights significant revenue growth and strategic progress, particularly in AI-driven solutions, coupled with strong financial management. However, there are concerns about potential quarter-to-quarter revenue volatility and short-term margin impacts due to strategic investments.

Q1-2025 Updates

Positive Updates

Record Revenue Growth

Q1 2025 revenue reached $58.3 million, a year-over-year increase of 120%, and adjusted EBITDA for the quarter was $12.7 million, a 236% year-over-year increase.

Strategic Growth Initiatives

Innodata has made significant progress in strategic growth initiatives, including new customer wins and account expansions across four dynamic solutions areas, particularly in generative AI training data and agentic AI solutions.

Strong Cash Position

Innodata ended Q1 2025 with $66.6 million in cash, up from $46.9 million in the previous quarter, reflecting strong profitability and disciplined cash management.

Expansion in Generative AI Trust and Safety

Won expanded engagements to provide trust and safety evaluations for existing big tech customers, valued at approximately $4.5 million in annual recurring revenue.

Negative Updates

Quarter-to-Quarter Volatility

The Company anticipates potential volatility in revenue due to the dynamic demand signals from their largest customer, with expectations of a 5% decrease in Q2 from Q1 levels.

Investment Impact on Margins

Innodata plans to invest approximately $2 billion in Q2 to support a new statement of work, which is expected to temporarily impact margins before associated revenue is realized.

Company Guidance

Innodata provided a robust guidance during their Q1 2025 results call, forecasting a full-year revenue growth of at least 40%. The company reported a 120% year-over-year increase in revenue for the quarter, reaching $58.3 million, with an adjusted EBITDA of $12.7 million, representing 22% of revenue and a 236% increase compared to the previous year. They also highlighted cash reserves of $66.6 million, up significantly from both the previous quarter and year. Innodata's strategic growth initiatives, particularly in generative AI training data and AI agent development, have driven this performance, alongside new significant customer wins and expansions in existing accounts. Despite expecting some quarterly volatility due to customer demand dynamics, the company reaffirmed its confidence in achieving its guidance through continued investment in product innovation and market expansion.

Innodata Financial Statement Overview

Summary

Innodata demonstrates strong financial performance, with significant growth in revenue and profit margins. The cash flow has improved considerably, indicating robust cash generation. However, a lack of 2024 balance sheet data limits the analysis, and there is a need for continued focus on strengthening the balance sheet.

Income Statement

Very Positive

Innodata has shown a strong revenue growth trajectory with a significant increase in total revenue from $86.78M in 2023 to $141.10M in 2024, marking a growth of approximately 62.6%. The gross profit margin improved, reflecting a strong control over cost of goods sold, and the net profit margin turned positive, indicating profitability. The EBIT and EBITDA margins have also improved significantly, showcasing operational efficiency.

Balance Sheet

Neutral

The balance sheet metrics cannot be fully analyzed for 2024 due to missing data. However, in 2023, the debt-to-equity ratio was relatively low at 0.21, indicating conservative leverage. The return on equity was negative in 2023 due to a net loss, but the equity ratio was stable at 43.3%, indicating a reasonable financial structure.

Cash Flow

Positive

Innodata's cash flow has improved significantly, with operating cash flow increasing sharply to $35.02M in 2024. Free cash flow has grown substantially, reflecting strong cash generation capabilities. The operating cash flow to net income ratio indicates robust cash conversion, although free cash flow growth rate is not calculable without prior period data.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
141.10M	86.78M	79.00M	69.75M	58.24M
	Gross Profit
52.91M	31.29M	27.47M	25.73M	19.89M
	EBIT
21.23M	0.00	-10.47M	-2.18M	1.28M
	EBITDA
21.23M	5.03M	-6.59M	1.22M	3.54M
	Net Income Common Stockholders
21.38M	-908.00K	-12.01M	-1.80M	617.00K
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
46.90M	13.82M	10.30M	18.90M	17.57M
	Total Assets
113.45M	59.43M	48.04M	59.22M	57.25M
	Total Debt
4.66M	5.48M	4.73M	6.31M	7.32M
	Net Debt
-42.23M	-8.32M	-5.06M	-12.59M	-10.25M
	Total Liabilities
50.06M	34.44M	30.00M	32.81M	31.00M
	Stockholders Equity
63.47M	25.70M	18.77M	29.93M	29.64M
Cash Flow		Free Cash Flow
27.27M	339.00K	-7.74M	783.00K	4.25M
	Operating Cash Flow
35.02M	5.90M	-1.22M	5.15M	5.66M
	Investing Cash Flow
-7.74M	-5.07M	-7.03M	-4.37M	-1.38M
	Financing Cash Flow
6.06M	2.87M	-307.00K	773.00K	2.31M

Innodata Technical Analysis

Technical Analysis Sentiment

Positive

Last Price39.95

Price Trends

50DMA

37.36

Positive

100DMA

40.83

Negative

200DMA

33.33

Positive

Market Momentum

MACD

-0.08

Negative

RSI

56.08

Neutral

STOCH

66.22

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For INOD, the sentiment is Positive. The current price of 39.95 is above the 20-day moving average (MA) of 37.32, above the 50-day MA of 37.36, and above the 200-day MA of 33.33, indicating a bullish trend. The MACD of -0.08 indicates Negative momentum. The RSI at 56.08 is Neutral, neither overbought nor oversold. The STOCH value of 66.22 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for INOD.

Innodata Risk Analysis

Innodata disclosed 14 risk factors in its most recent earnings report. Innodata reported the most risks in the “Legal & Regulatory” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 3 New Risks

If customer confidential information is inappropriately disclosed due to a breach of our computer systems, system failures or otherwise, or if any person, including any of our employees, negligently disregards or intentionally breaches controls or procedures with which we are responsible for complying with respect to such data or otherwise mismanages or misappropriates that data, we may have substantial liabilities to our customers. Q4, 2024

Risks Related to Litigation and Regulatory Matters Q4, 2024

Q4, 2024

Innodata Peers Comparison

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
INOD	73 Outperform	$1.16B	35.08	68.82%	―	114.21%	1471.86%
FLYW	69 Neutral	$1.29B	375.18	0.63%	―	20.97%	―
TASK	67 Neutral	$1.49B	28.17	11.35%	―	14.05%	17.90%
GDYN	66 Neutral	$1.10B	99.69	2.42%	―	18.72%	347.70%
Sector *	61 Neutral	$11.29B	10.17	-6.88%	2.97%	7.41%	-8.93%
VYX	54 Neutral	$1.54B	―	-19.49%	―	-50.48%	-15.75%
BBAI	44 Neutral	$1.31B	―	-126.64%	―	9.40%	13.55%

* Technology Sector Average

Performance Comparison

INOD

Innodata

39.95

27.44

219.34%

VYX

NCR Voyix

11.18

-1.71

-13.27%

GDYN

Grid Dynamics Holdings

12.63

2.73

27.58%

BBAI

BigBearai Holdings

4.49

2.96

193.46%

FLYW

Flywire

10.58

-7.03

-39.92%

TASK

TaskUs

16.55

2.68

19.32%

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.