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Innodata Inc: Tiny Big-Data Play Is Up 217% Over Past Year; Chart…

By George Leong, B.Comm. Published : October 11, 2021

Why Innodata Stock Is Bullish

In today’s competitive environment, companies are on a constant quest to better understand and use their enormous streams of data.

That’s where Innodata Inc (NASDAQ:INOD) comes in. The company provides a big-data solution that combines human expertise with artificial intelligence and machine learning to generate key data and insights for its clients.

While the tailwinds are huge, Innodata Inc has struggled to deliver consistency, but there’s optimism for a turnaround.

The stock market has rewarded Innodata stock with an 87% gain this year and a 217% gain over the past year. The return was skewed, however, as INOD stock was coming off a low of $0.75 in April 2020.

INOD Stock Breaks to Decade High

Innodata stock looks bullish after trading at a 10-year high of $10.48 on October 5.

The buying and strong upward trend was triggered by a golden cross pattern in June 2020. A golden cross is a bullish crossover of the 50-day moving average above the 200-day moving average.

INOD stock stalled a bit in a sideways channel below $10.00 prior to making a recent breakout attempt that was fueled by high relative strength and a moving average convergence/divergence (MACD) buy signal.

Chart courtesy of StockCharts.com

Where Innodata stock goes from here is up in the air, since it’s new ground.

Point-and-figure analysis shows a bullish triangle breakout and an initial target of $13.75, but due to rapid price appreciation, INOD stock is vulnerable to bad news.

Market Expecting Better Results From Innodata Inc

A look at Innodata Inc’s five-year revenue picture shows a lack of growth. The company’s revenues fell from 2017 to 2019, prior to a small bump in 2020.

Fiscal Year Revenues (Millions) Growth
2016 $63.1 N/A
2017 $60.9 -3.4%
2018 $57.4 -5.8%
2019 $55.9 -2.7%
2020 $58.2 4.3%

(Source: “Innodata Inc,” MarketWatch, last accessed October 8, 2021.)

There is minimal coverage of Innodata Inc, but if the second-quarter results are any indication, the company is on target for higher revenue growth. Innodata’s revenue run rate based on the second quarter is $68.0 million, or growth of about 10%. That’s not great, but it’s an improvement.

Until Innodata Inc can consistently ramp up its revenues, the company will need to monitor its spending. That appears to be working.

The company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) were positive in the last three years, including a 91.5% jump in 2020.

Fiscal Year EBITDA Growth
2016 -$26,000 N/A
2017 -$1.2 Million -4,380%
2018 $6.1 Million 619.6%
2019 $1.9 Million -68.7%
2020 $3.6 Million 91.5%

(Source: MarketWatch, op. cit.)

In 2020, Innodata Inc produced earnings per share (EPS) of $0.02, based on generally accepted accounting principles (GAAP), after four consecutive years of losses.

Fiscal Year GAAP Diluted EPS Growth
2016 -$0.22 N/A
2017 -$0.20 11.0%
2018 -$0.01 95.0%
2019 -$0.08 -747.9%
2020 $0.02 129.0%

(Source: MarketWatch, op. cit.)

Moreover, Innodata Inc delivered higher positive free cash flow in the last three years, to a record $4.3 million in 2020.

Fiscal Year Free Cash Flow (Millions) Growth
2016 -$5.5 N/A
2017 -$2.8 49.4%
2018 $1.5 155.4%
2019 $2.6 70.3%
2020 $4.3 62.5%

(Source: MarketWatch, op. cit.)

Innodata Inc’s balance sheet is healthy, with $22.1 million of cash and $6.8 million of debt. (Source: “Innodata Inc. (INOD),” Yahoo! Finance, last accessed October 8, 2021.)

Analyst Take

While institutional ownership of Innodata stock is relatively low (which is what you’d expect for a micro-cap speculative stock), I could see more institutions jump aboard INOD stock if the company’s fundamentals strengthen.

The big-data solutions area will continue to be strong, and I expect Innodata Inc to benefit from the growth.

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