WEBULL

Declining Stock and Solid Fundamentals: Is The Market Wrong About Innodata Inc. (NASDAQ:INOD)?

Simply Wall St · 3d ago

It is hard to get excited after looking at Innodata's (NASDAQ:INOD) recent performance, when its stock has declined 33% over the past three months. However, stock prices are usually driven by a company’s financial performance over the long term, which in this case looks quite promising. Particularly, we will be paying attention to Innodata's ROE today.

Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. Put another way, it reveals the company's success at turning shareholder investments into profits.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

How Do You Calculate Return On Equity?

The formula for ROE is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for Innodata is:

35% = US$34m ÷ US$97m (Based on the trailing twelve months to September 2025).

The 'return' is the amount earned after tax over the last twelve months. So, this means that for every $1 of its shareholder's investments, the company generates a profit of $0.35.

Check out our latest analysis for Innodata

Why Is ROE Important For Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company’s earnings growth potential. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics.

A Side By Side comparison of Innodata's Earnings Growth And 35% ROE

Firstly, we acknowledge that Innodata has a significantly high ROE. Additionally, the company's ROE is higher compared to the industry average of 21% which is quite remarkable. So, the substantial 65% net income growth seen by Innodata over the past five years isn't overly surprising.

As a next step, we compared Innodata's net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 12%.

past-earnings-growth
NasdaqGM:INOD Past Earnings Growth January 6th 2026

Earnings growth is an important metric to consider when valuing a stock. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. Doing so will help them establish if the stock's future looks promising or ominous. If you're wondering about Innodata's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Innodata Using Its Retained Earnings Effectively?

Given that Innodata doesn't pay any regular dividends to its shareholders, we infer that the company has been reinvesting all of its profits to grow its business.

Conclusion

In total, we are pretty happy with Innodata's performance. In particular, it's great to see that the company is investing heavily into its business and along with a high rate of return, that has resulted in a sizeable growth in its earnings. Having said that, the company's earnings growth is expected to slow down, as forecasted in the current analyst estimates. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.