Dealmaker’s Diary: Is INOD a Buy?

Alpesh Patel|January 2, 2025

Small cap… big potential?

This reader-submitted AI data-engineering company looks enticing with its $1 billion market cap and debt-free balance sheet.

Specializing in AI-powered data transformation, Innodata serves major clients across the U.S., U.K., and Europe.

But with a P/E ratio of 47 and concerning MACD indicators, is this small cap stock’s momentum sustainable?

My proprietary GVI systems tells the full story.

This the kind of research my clients pay thousands for… but you get it for FREE as a Total Wealth subscriber.

Click here or on the image below to dive in. And when you’re done, send an email to mailbag@manwardpress.com with a ticker you’d like me to review!

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TRANSCRIPT

Happy New Year, everyone… and welcome to the first Stock of the Week in the Dealmaker’s Diary for 2025.

Today’s stock, requested by a reader, is Innodata (INOD) – a global data engineering company specializing in AI-powered data transformation and digital content solutions.

It’s a small company with third-quarter revenue of $52 million and a market cap of $1 billion, suggesting room for growth. Of course, the question on everyone’s mind: Could any AI-related company become the next Nvidia?

Innodata has a strong client list and three main segments. It’s internationally diversified across the U.K., U..S and Europe. The company is also debt-free.

Looking at the numbers, it’s expensive given its AI focus – you’re paying $47 for every dollar of expected future profit. This high valuation drags down my Growth-Value-Income rating to 5. That means it doesn’t meet my minimum requirement for investing – my proprietary algorithm measuring a company’s valuation, its revenue growth and dividends.

Unfortunately, the cash return on capital invested is relatively low. But the Sortino ratio is good, showing high average returns for downside volatility, even though overall volatility is high.

Based on narrative alone – the AI story – one might be optimistic. However, the data raises concerns. Like many companies in this space, it’s overbought. The MACD, measuring short and medium-term price momentum, shows potential downward pressure. It’s broken above previous highs on momentum rather than valuation.

Another concern: The stock trades under $100, meaning small price movements can create significant percentage changes in your investment. If the current trend continues at this angle, returns could be spectacular. For stop-loss placement, consider setting it based on the principle that an upward-trending stock shouldn’t retreat below certain levels.

Don’t bother with discounted cash flow analysis – that’s not the appropriate metric here.

You’re betting on momentum and narrative. I prefer investing based on data (which helped me identify Nvidia in January 2023). This approach works for both large and small stocks.

I offer this analysis with caution. This is the same analytical process I used while co-hosting on CNBC, reviewing markets for BBC, or hosting my Bloomberg TV show – but tailored specifically for you.