Is There Still Upside in Innodata After 90% Surge on AI Partnership News?

If you’re sizing up your next move with Innodata, you are definitely not alone. The stock isn’t just trending; it’s been on a jaw-dropping run that has left many investors wondering: is there more upside ahead, or is all the good news already baked in? In just the last year, Innodata has skyrocketed an astounding 444.6%. That comes after a 113.0% gain so far this year alone. The momentum has been particularly intense over the past month, with a 93.5% gain building on recent excitement around innovative tech partnerships and industry-wide AI tailwinds. Even the last week has seen the shares jump 10.8%, showing that interest isn’t cooling off just yet.

But with shares now closing at $84.135, are we looking at a great business that’s still undervalued, or a case of market optimism getting ahead of itself? According to our valuation framework, Innodata checks in with a score of 0 out of 6 for undervaluation. This is a signal that, by the numbers, it currently doesn’t pass any of our standard measures for being a bargain. That doesn’t mean opportunity is off the table, but it does put a spotlight on how we approach valuation, especially after such a spectacular run-up. Before jumping to any conclusions, let’s walk through the different valuation approaches investors use to judge stocks like Innodata. Then, I’ll share a perspective that could help you see value in a whole new light.

Innodata scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Innodata Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a staple for investors aiming to understand what a business might really be worth. It works by forecasting Innodata’s future cash flows and then discounting those projections back to today, offering a snapshot of the firm’s present value based on expected performance.

In Innodata’s case, the company’s most recent Free Cash Flow sits at $32.6 million. This figure is expected to decrease, with analyst estimates projecting Free Cash Flow to fall to $26.04 million by 2026. Over the next decade, automated projections suggest only modest changes, with Free Cash Flow projected at $25.9 million by 2035. These forecasts are driven primarily by near-term analyst outlook, while later years are based on extrapolated trends.

After crunching the numbers, the DCF model arrives at an intrinsic value for Innodata shares of $16.34, using today’s dollars. With the current share price at $84.135, the market price is approximately 415% above the DCF estimate. This suggests the stock is dramatically overvalued based on cash flow projections alone.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Innodata.

Our Discounted Cash Flow (DCF) analysis suggests Innodata may be overvalued by 415.0%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Innodata Price vs Earnings

When evaluating profitable companies like Innodata, the Price-to-Earnings (PE) ratio is often the preferred metric. This is because it reflects how much investors are willing to pay for each dollar of earnings, making it a direct way to gauge whether the stock is trading at a sensible valuation given its profitability.

A “normal” or “fair” PE ratio isn’t one-size-fits-all. Higher growth expectations usually justify a higher PE, while greater risks or slower growth can mean a lower one is fair. It comes down to the outlook for the company’s future earnings and how much certainty (or risk) investors perceive in achieving that growth.

Currently, Innodata trades at 62.76x earnings. To put this into perspective, the Professional Services industry average is 26.79x while the average among Innodata’s peers is 36.91x. Both comparisons suggest Innodata is commanding a significant premium to other companies in its space.

This is where Simply Wall St’s proprietary “Fair Ratio” comes in. Unlike just comparing to industry or peers, the Fair Ratio factors in Innodata’s unique profile, including its growth outlook, risks, profit quality and market capitalization. For Innodata, the Fair Ratio is 21.87x, which is well below its current market PE. Since the PE multiple is substantially higher than the Fair Ratio, this indicates the stock is trading well above what would typically be considered justified for its characteristics.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Innodata Narrative

Earlier we mentioned there is an even better way to understand valuation, so let's introduce you to Narratives. Narratives are an intuitive investing tool that helps you connect your belief about a company's future with the numbers to create your own fair value estimate.

Rather than relying solely on one formula or a fixed set of assumptions, a Narrative lets you tell the story behind Innodata’s numbers, including what you expect for future revenue, earnings, and margins. You start by laying out your view—maybe you’re confident in Innodata's continued leadership in AI data services, or perhaps you're cautious given recent margin pressure. The platform then translates that perspective into a dynamic financial forecast and fair value.

Narratives empower you to see immediately whether your outlook justifies buying, holding, or selling shares by comparing your own fair value to the latest market price. The best part? On Simply Wall St's Community page, you can access and refine Narratives created by millions of investors. You aren't investing in isolation and can learn from multiple viewpoints. As new information arrives, such as quarterly results or industry news, each Narrative updates automatically. This ensures your valuation is always current and actionable.

For example, while one investor’s Narrative for Innodata might assume robust AI demand and call for a fair value of $75.0, another could focus on margin risks and assign only $55.0. This illustrates how the same data can support different, well-reasoned views.

Do you think there's more to the story for Innodata? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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