INNV

We rate InnovAge Holding Corp. (INNV) as a Hold with a composite score of 63.4/100 at a current price of $8.90. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in momentum (93th percentile) and value (70th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (26th percentile) and stability (41th percentile) tempers our overall conviction. We assign a No Moat rating (24/100), Medium uncertainty, and Poor capital allocation.

Key items to watch: sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

InnovAge Holding Corp. holds a top-quartile position (#0 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 63.4/100 places it at rank #394 in our full 7,333-stock universe. At $700M in market capitalization, InnovAge Holding Corp. is a small-cap player in the Services space, which limits certain scale advantages but may allow for more agile strategic execution.

The near-term outlook is constructive, with revenue growing at 24% and momentum in the 93th percentile confirming positive market sentiment and institutional accumulation. The combination of strong top-line growth and favorable price dynamics suggests the company is executing well on its growth strategy. Investment factor at the 26th percentile indicates reinvestment patterns that investors should monitor for sustainability.

The margin cascade tells an important story: gross margins of 20% (-39.7pp vs sector) narrow to operating margins of 0% (-3.0pp vs sector) and net margins of 0.1%, yielding a gross-to-net conversion rate of 0%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $8.90, InnovAge Holding Corp. appears undervalued relative to its fundamentals. Our value factor score of 70/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 420.9x (a 1673% premium to the sector median of 23.7x), EV/EBITDA of 170.4x (at a premium), P/B of 4.2x, P/S of 1.2x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Medium uncertainty rating to InnovAge Holding Corp.. The stock presents a balanced risk profile: elevated valuation multiple (P/E 420.9x) that leaves limited margin for error and the combination of leverage (91% D/E) and thin margins (0.1% net) amplifies downside risk. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: elevated valuation multiple (P/E 420.9x) that leaves limited margin for error; the combination of leverage (91% D/E) and thin margins (0.1% net) amplifies downside risk. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 41th percentile and quality factor at the 69th percentile provide a quantitative summary of the overall risk landscape.

We identify limited risk mitigants at this time, which contributes to our medium uncertainty assessment. Investors should monitor for improvement in balance sheet metrics, margin stability, and business predictability that could warrant a downgrade in our risk assessment over time.

We rate InnovAge Holding Corp.'s capital allocation as Poor. Key concerns include low returns on equity (1.0%), weak asset returns (ROA 0.5%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — InnovAge Holding Corp. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, InnovAge Holding Corp. receives a Hold rating with a composite score of 63.4/100 (rank #394 of 7,333). Our quantitative framework assigns a No Moat (24/100, trend: stable), Medium uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 60/100.

Our analysis supports a neutral stance on InnovAge Holding Corp.. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.