Here's Why Innodata Stock is a Buy Even With a P/S of 5.01X

Innodata INOD shares are trading at a premium valuation, as suggested by its Value Score of F. In terms of the 12-month price/sales (P/S), INOD is currently trading at 5.01X, higher than its median of 3.41X and the Zacks Computer – Services industry’s 1.92X.INOD’s premium valuation is justified by its strong growth prospects and strategic positioning in the generative AI (GenAI) space. By focusing on Big Tech’s increasing investments in GenAI, Innodata has positioned itself as a key partner for data engineering, particularly in creating supervised fine-tuning data for training advanced AI models.Morgan Stanley has projected combined capital expenditures of $300 billion in 2025 and $337 billion in 2026 for Amazon AMZN, Alphabet GOOGL, Meta Platforms META and Microsoft on GenAI and large language model (LLM) enabled advancements.Price/Sales Ratio (F12M)Image Source: Zacks Investment ResearchThis projected spending reflects a long-term focus on GenAI opportunities. Amazon, the top spender, is focusing on hyperscaler initiatives while leveraging its high-margin businesses for profitability.Alphabet’s efforts center on AI-driven innovations in Search, YouTube and other platforms, boosting engagement and growth. Meta is emphasizing efficiency and improved monetization, particularly via Reels on Instagram.Microsoft is heavily investing in public cloud adoption and AI, with expectations of strong commercial business growth in the coming years. It is rapidly gaining market share in e-commerce and retail, as well as increasing its share of consumer spending.The surging capital expenditures by Big Tech on GenAI are providing a significant growth opportunity for Innodata. It is well-positioned to meet the growing demand for high-quality AI training data and drive its top-line growth.Consequently, INOD shares have skyrocketed 291.8% in the trailing 12-month period, outperforming the Zacks Computer and Technology sector’s appreciation of 28.9% and the industry’s return of 10.5%.One-Year PerformanceImage Source: Zacks Investment ResearchInnovative Portfolio & Expanding Footprint Aid INODINOD is capitalizing on its expertise in instruction-tuning data and Reinforcement Learning from Human Feedback (RLHF). With increasing concerns over intellectual property (IP) issues and the risks of “model collapse” from web-scraped data, INOD’s focus on creating proprietary, high-quality, supervised fine-tuning data is providing it a distinct competitive edge.INOD’s cutting-edge Agility platform, designed for specialized workflows involving generative AI, has been experiencing growing demand in the market.INOD is advancing its portfolio with new AI platforms to address emerging needs, such as LLM safety and evaluation. Prototypes of its latest platforms have been well-received by multiple Big Tech clients and enterprises, reinforcing Innodata’s innovation-driven approach.The company’s growth strategy extends beyond Big Tech to enterprises transitioning from legacy systems to AI-first solutions. By offering strategic consulting, integration and customization services, INOD is poised to capture the rising demand for generative AI across diverse industries.INOD has also expanded its footprint into the federal government market, with its Agility platform supporting media monitoring and news briefing for government agencies. The diversification has reduced Innodata’s dependency on private sector clients and has broadened INOD’s revenue base.The Zacks Consensus Estimate for INOD’s 2025 revenues is pegged at $221.30 million, indicating growth of 34.6% on a year-over-year basis.The consensus mark for INOD’s 2025 earnings is currently pegged at 82 cents per share, unchanged over the past 30 days and indicating year-over-year growth of 5.1%.Innodata Inc. Price and Consensus Innodata Inc. price-consensus-chart | Innodata Inc. QuoteFind the latest EPS estimates and surprises on Zacks Earnings Calendar.Why Investors Should Buy INOD Stock?Innodata’s prospects are strengthened by its strategic alignment with the rapidly growing generative AI market, expanding client base and a diverse portfolio that includes the public sector. These factors collectively position INOD as a pivotal player in the evolving AI ecosystem.INOD’s impressive growth potential, fueled by surging demand for high-quality AI training data and cutting-edge solutions, fully justifies its premium valuation.Innodata currently has a Zacks Rank #1 (Strong Buy) and a Growth Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks proprietary methodology. You can see the complete list of today’s Zacks #1 Rank stocks here.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amazon.com, Inc. (AMZN): Free Stock Analysis Report Innodata Inc. (INOD): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis Report Meta Platforms, Inc. 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