Innodata (INOD) AI Stock Analysis

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Innodata

(NASDAQ:INOD)

Rating:77Outperform

Price Target:

$51.00

▲(11.74%Upside)

Innodata's stock is supported by strong financial performance and strategic progress in AI solutions, which are major growth drivers. The technical outlook is positive but suggests caution due to overbought signals. The valuation is high, reflecting growth expectations, but could limit upside potential. Confidence in continued growth is bolstered by positive earnings guidance.

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

$1.41B

Dividend YieldN/A

Average Volume (3M)2.02M

Price to Earnings (P/E)43.2

Beta (1Y)3.37

Revenue Growth114.21%

EPS Growth1471.86%

CountryUS

Employees6,597

SectorTechnology

Sector Strength83

IndustryInformation Technology Services

Share Statistics

EPS (TTM)0.22

Shares Outstanding31,745,310

10 Day Avg. Volume2,008,780

30 Day Avg. Volume2,024,761

Financial Highlights & Ratios

PEG Ratio1.54

Price to Book (P/B)16.40

Price to Sales (P/S)0.00

P/FCF Ratio41.13

Enterprise Value/Market Cap0.86

Enterprise Value/Revenue1.95

Enterprise Value/Gross Profit14.94

Enterprise Value/Ebitda12.41

Forecast

1Y Price Target

$69.00

Price Target Upside51.18% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering4

Innodata Business Overview & Revenue Model

Company DescriptionInnodata Inc. (INOD) is a data engineering company that specializes in providing AI-driven digital transformation solutions and services. The company operates across various sectors, including information technology, digital content, and data analytics. Its core offerings include data annotation, data enrichment, and knowledge process outsourcing, catering to businesses looking to enhance their data management and analytics capabilities.

How the Company Makes MoneyInnodata generates revenue primarily through its comprehensive suite of data solutions and services. The company's key revenue streams include contracts for data annotation and enrichment services, which are often utilized by enterprises seeking to improve their AI and machine learning models. Additionally, Innodata earns from knowledge process outsourcing where clients outsource complex data management tasks to Innodata's skilled workforce. Significant partnerships with technology firms and enterprises in need of robust data solutions also contribute to its earnings by providing recurring and project-based revenue opportunities.

Innodata Key Performance Indicators (KPIs)

Any

Adjusted EBITDA by Segment

Adjusted EBITDA by Segment
Provides a view of operating performance by segment, excluding non-cash items and one-time charges, to assess underlying profitability 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: 11.02%|

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 health with impressive revenue growth, effective cost management, and efficient cash generation. The robust balance sheet with low leverage and high ROE supports financial stability and future growth prospects.

Income Statement

Very Positive

Innodata has demonstrated strong revenue growth, with a TTM revenue increase to $202.3M, marking a significant jump from the previous year. Gross Profit Margin stands at 39.9%, and the Net Profit Margin is 17.5%, indicating effective cost management and profitability. The company has also improved its EBIT and EBITDA Margins to 15.5% and 18.5%, respectively, showcasing operational efficiency. These metrics highlight a positive trajectory in profitability and growth.

Balance Sheet

Positive

The balance sheet reflects a solid financial position with a Debt-to-Equity Ratio of 0.17, suggesting low leverage and financial risk. The Return on Equity (ROE) is 47.0%, indicating strong profitability relative to shareholder investment. The Equity Ratio is 60.2%, showcasing a strong asset base funded by equity. The financial stability is robust, though the company should continue monitoring its liabilities and asset management.

Cash Flow

Positive

Innodata's cash flow performance is commendable, with a Free Cash Flow Growth Rate of 11.3% in the TTM period, reflecting efficient cash generation. The Operating Cash Flow to Net Income Ratio is 1.10, indicating strong cash conversion. The Free Cash Flow to Net Income Ratio is 0.86, showing a healthy cash flow profile. These figures demonstrate the company's ability to generate and manage cash effectively, supporting future growth and investments.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
202.30M	170.46M	86.78M	79.00M	69.75M	58.24M
	Gross Profit
80.69M	67.07M	31.29M	27.47M	25.73M	19.89M
	EBIT
31.28M	24.34M	0.00	-10.47M	-2.18M	1.28M
	EBITDA
37.37M	30.13M	5.03M	-6.59M	1.22M	3.54M
	Net Income Common Stockholders
35.46M	28.66M	-908.00K	-12.01M	-1.80M	617.00K
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
46.90M	46.90M	13.82M	10.30M	18.90M	17.57M
	Total Assets
113.45M	113.45M	59.43M	48.04M	59.22M	57.25M
	Total Debt
4.66M	4.66M	5.48M	4.73M	6.31M	7.32M
	Net Debt
-42.23M	-42.23M	-8.32M	-5.06M	-12.59M	-10.25M
	Total Liabilities
50.06M	50.06M	34.44M	30.00M	32.81M	31.00M
	Stockholders Equity
63.47M	63.47M	25.70M	18.77M	29.93M	29.64M
Cash Flow		Free Cash Flow
30.36M	27.27M	339.00K	-7.74M	783.00K	4.25M
	Operating Cash Flow
39.12M	35.02M	5.90M	-1.22M	5.15M	5.66M
	Investing Cash Flow
-8.75M	-7.74M	-5.07M	-7.03M	-4.37M	-1.38M
	Financing Cash Flow
7.21M	6.06M	2.87M	-307.00K	773.00K	2.31M

Innodata Technical Analysis

Technical Analysis Sentiment

Positive

Last Price45.64

Price Trends

50DMA

37.14

Positive

100DMA

40.99

Positive

200DMA

34.20

Positive

Market Momentum

MACD

1.80

Negative

RSI

65.15

Neutral

STOCH

84.48

Negative

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 45.64 is above the 20-day moving average (MA) of 38.68, above the 50-day MA of 37.14, and above the 200-day MA of 34.20, indicating a bullish trend. The MACD of 1.80 indicates Negative momentum. The RSI at 65.15 is Neutral, neither overbought nor oversold. The STOCH value of 84.48 is Negative, 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 (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
TASK	80 Outperform	$1.48B	28.01	11.35%	―	14.05%	17.90%
INOD	77 Outperform	$1.41B	43.24	68.82%	―	114.21%	1471.86%
FLYW	69 Neutral	$1.22B	360.99	0.63%	―	20.97%	―
GDYN	66 Neutral	$1.03B	93.96	2.42%	―	18.72%	347.70%
Sector *	62 Neutral	$11.75B	10.58	-7.10%	2.91%	7.47%	-7.95%
VYX	54 Neutral	$1.49B	―	-19.49%	―	-50.48%	-15.75%
BBAI	48 Neutral	$1.10B	―	-126.64%	―	9.40%	13.55%

* Technology Sector Average

Performance Comparison

INOD

Innodata

45.64

30.48

201.06%

VYX

NCR Voyix

11.06

-1.77

-13.80%

GDYN

Grid Dynamics Holdings

11.95

2.39

25.00%

BBAI

BigBearai Holdings

3.77

2.41

177.21%

FLYW

Flywire

10.18

-7.19

-41.39%

TASK

TaskUs

16.71

2.08

14.22%

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.