-$2.35
$0.49
bear -$2.35
base -$0.36
bull $0.49
market price* $11.81
Neogen makes food safety tests (pathogen detection, indicator testing, culture media including the Petrifilm line) and animal safety products (veterinary products plus genomics testing services, $102.2 million of service revenue in fiscal 2026). Revenue was $870.4 million in fiscal 2026, 51.2% of it outside the United States. In September 2022 it combined with 3M's Food Safety business, which lifted revenue from $527 million (fiscal 2022) to $924 million (fiscal 2024), more than doubled the share count (108 million to about 217 million) and added about $900 million of debt. Results before 2022 describe a different, debt-free company, so we read the record in two halves. What the cash record shows. Before the deal, owner earnings (cash from operations after stripping out working-capital swings, stock compensation and maintenance capital spending) ran about $0.42 to $0.62 per share a year. Since the deal they were $0.07 (fiscal 2023, a part-year), then negative $0.15, negative $0.26 and negative $0.18 per share for fiscal 2024, 2025 and 2026. Operating income swung from a $58.6 million profit in fiscal 2024 to a $21.6 million loss in fiscal 2026 as gross margin slid from 50.2% to 46.9% and general and administrative costs rose. Spending on the new Lansing, Michigan plant and on separating from 3M ran $111 million, $105 million and $51 million a year over fiscal 2024 to 2026. One correction to what readers may have seen earlier: fiscal 2026 looks better on a raw cash basis only because $58 million of working capital came in, mainly a $38 million inventory reduction; with that removed, fiscal 2026 was still negative. Because the company is heavily indebted, we value the business before its lenders and then subtract what it owes. Cash flow before paying lenders, after stock compensation and maintenance capital spending, was $41 million in fiscal 2024, $11 million in fiscal 2025 and $19 million in fiscal 2026. Debt at May 31, 2026 was $800 million, cut by a further $20 million prepayment in June 2026 to $780 million: about $385 million of term loan and a $48.5 million revolver draw, both due April 2030, and $346.5 million of 8.625% senior notes due 2030. Cash was $185.5 million; we treat $60 million as needed to run the business and the rest as available against debt. The notes cost about 2.6 points a year more than a normal borrowing for roughly four years, which adds about $30 million. Net debt is therefore about $705 million, or $3.24 per share on 217.5 million shares. Interest at today's debt level is about $55 million a year, more than the business currently produces before interest, so owners are being paid nothing while the cash cushion is drawn down. The lenders' covenants (funded debt to EBITDA and debt service cover) were met at year end. Starting point for the cases. Fiscal 2026 is a clean base: the Cleaners and Disinfectants business was sold in July 2025 ($121.7 million, used to repay debt), and underlying sales grew $17.3 million (about 1.9%), led by indicators, pathogen detection and sample collection. We start at $25 million a year of cash flow before lenders, which is fiscal 2026's $18.7 million with capital spending at $45 million instead of $51.3 million (management points to about $40 million for fiscal 2027 now that Lansing is nearly finished). That is a 34% step up from fiscal 2026, below the 72% improvement actually seen from fiscal 2025 to 2026, and it comes from lower capital spending already under way rather than from operating improvement. We did not add back the restructuring charges ($7.0 million in fiscal 2026, $11.1 million in fiscal 2025) because they have recurred two years running. About $92 million a year of acquired-intangible amortisation is non-cash and is not deducted; we reflect the wearing-out of those customer relationships by giving the base case only 2% annual growth and by eroding the bear case. Bear case: negative $2.35 per share. Petrifilm, still made in 3M plants in the U.S. and Poland, does not transfer cleanly, and the company repeats part of its fiscal 2024 to 2026 slide, when gross profit fell $55 million (12%). We assume a further $28 million (about 7%) gross profit loss, half offset by cost cuts, so cash flow before lenders is $18.7 million in fiscal 2027 (capital spending stays near $51 million), then falls to $5 million for two years, then settles at $12 million a year with no growth and no recovery of the duplicate costs. The business is worth about $194 million against $705 million of net debt: the company owes roughly $510 million more than it is worth, and with all three borrowings due in 2030 a restructuring that leaves shareholders nothing is the realistic outcome. Base case: negative $0.36 per share. Cash flow before lenders starts at $25 million and grows 2% a year, in line with last year's underlying sales growth. Before the deal revenue grew every year from fiscal 2017 to 2022 (1% to 13%, partly through acquisitions), but only one post-deal year of underlying growth is on record, so we credit no more. From fiscal 2029 we credit $10 million a year as the duplicate Petrifilm costs end. The evidence is the $9.8 million rise in those costs disclosed for fiscal 2026 and a Lansing plant that is already paid for and nearly complete, with qualification testing carried out through fiscal 2026; we assume completion two years later than the company's stated fiscal 2027 target, because the 10-K says the move only begins in fiscal 2027. Cash flow reaches about $40 million by year ten and stays flat afterwards, because the business sells validated, repeat-purchase testing consumables and has operated since 1982. The business is worth about $626 million against $705 million of net debt, a shortfall of roughly $79 million. Each $5 million a year of cash flow, up or down, moves this by about $0.38 per share. Bull case: $0.49 per share. Capital spending is $40 million as guided and the Petrifilm transition finishes on the company's own schedule, removing $10 million of duplicate cost from fiscal 2028; cash flow before lenders is $30 million, then $40 million and growing 3.5% a year to about $53 million by year ten, flat thereafter. The business is worth about $810 million against $705 million of net debt, leaving about $106 million for shareholders. We left out margin recovery to fiscal 2024 levels, new products and share gains: none has happened yet. Testing the case. The $10 million cost saving rests on one disclosed number, the $9.8 million increase; total duplicate costs are not disclosed, and the move had not begun at year end. The company also paid $17.7 million of income tax in fiscal 2026 despite a loss; that stays in the cash flows. A September 2026 FDA warning letter on the Neogen Vet HYCOAT equine product was reported after the annual filing; its financial effect is not disclosed, so it is not in any case. Our previous analysis (August 31, 2026) assumed margins recovering toward fiscal 2024 levels and counted fiscal 2026 as a positive owner-earnings year; those figures ($0.85, $3.60, $8.10) are not comparable and are superseded. Margin-of-safety price. We are not setting one. The earnings level is only moderately certain: operating income fell by $80 million in two years, and a $5 million change moves the shares by $0.38. The worst plausible outcome, a failed Petrifilm transfer and a 2030 refinancing the lenders will not do, leaves shareholders with nothing, and the structure does not survive it: $780 million of debt sits on roughly $25 million of cash flow before lenders. The median outcome we can support is worth less than zero to shareholders and only the strong case is positive, at $0.49; the company has never paid a dividend and interest exceeds cash flow, so a holding period yields no income. No price can be justified from which the cases imply a 20% annual return.