Why Neogen (Nasdaq: NEOG) Stock's 21% One-Day Jump Is Just the Start

Neogen Corp. (Nasdaq: NEOG) reported Q2 earnings last week, and NEOG stock soared more than 21% in just one day following the report. That's because Neogen reported a record high for both earnings and revenue.

Looking ahead to next quarter, analysts predict 8% earnings growth and 12.3% revenue growth.

Money Morning readers are already familiar with NEOG stock. That's because NEOG has climbed 36.5% since we first recommended it on April 22, 2014.

As Money Morning Executive Editor Bill Patalon explains, NEOG stock "lies at the intersection of several powerful emerging high-profit trends."

And that's why the 36% gain we've seen is only the start...

Why NEOG Stock Is Headed Higher in 2015

Neogen develops a number of products for food and animal safety, including diagnostic test kits used to test bacteria, sanitation, and levels of allergens. The company's kits provide "fast-test" results, which are a considerable upgrade from typical microbiology tests that have to be sent back to labs for analysis.

Stocks to Buy"Neogen is one of the very best ways to play food safety and agriculture tech," Money Morning Defense & Tech Specialist Michael A. Robinson said. "And don't underestimate the importance of that second item. The small-cap firm ensures the safety of food and animal products, which is pretty much the entire agriculture ecosystem."

But there's another reason that Robinson and Patalon are particularly bullish on NEOG stock.

Neogen has begun selling rapid tests for food allergens like peanuts and gluten.

That's important because more than 15 million Americans have food allergies, according to Food Allergy Research & Education Inc. (FARE). More than 17 million Europeans deal with food allergies as well.

"If you're talking about children under 18, this very serious malady affects one in every 13 kids - about two in any classroom you walk into," Patalon said.

And the market is growing at a fast pace...

Allergy Spending Fuels NEOG Stock's Growth

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A study from the Centers for Disease Control and Prevention (CDC) says food allergies in children grew by 50% from 1997 through 2011. The economic cost of that growth was worth $25 billion.

"But if you're a parent of one of these kids, that 'cost' runs a distant second to the worry you feel every time your son or daughter buys a school lunch, goes to a friend's birthday party, goes out to eat with others, or snags a snack while at a friend's house," Patalon said.

"Until researchers can fully understand the cause of this increased allergen sensitivity, testing - with kits like those made by Neogen - are one safety-enhancing alternative," he continued.

According to the CDC, there are more than 200,000 emergency room visits due to food allergies every single year.

In the last three months, shares of NEOG stock have climbed 29.5%. That compares to a loss of 0.5% for the Dow Jones Industrial Average in the same time frame. In the last five years, NEOG is up 190%, compared to 70% for the Dow. NEOG opened today at $57.27.

The Bottom Line: Neogen (Nasdaq: NEOG) stock climbed 21% in one day last week on solid earnings. But that's not the biggest reason why we're bullish on NEOG stock moving forward. This company has developed fast-test food allergen kits at a time when the market is exploding. Expect the growing number of food allergies to lift this stock even higher.

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