Let the Good Times Roll: 2 Stocks Showing No Signs of Slowing

Key Points

• Although the broader market has generated impressive returns on its own in recent months, Innodata and Astronics are two examples of companies that have vastly outperformed the S&P 500.
• Innodata's shift toward AI data services places it in an excellent position to benefit from surging and sustained demand in this industry.
• Astronics has a dominant position in in-flight connectivity, with the benefits of this high-demand space likely outweighing risks posed by tariffs and supply chains.

Whether buoyed by massive gains in the AI space or not, the S&P 500 has experienced a strong several months, climbing by nearly 33% since early April. Two fairly under-appreciated companies—Innodata Inc. NASDAQ: INOD and Astronics Corp. NASDAQ: ATRO—have far surpassed those gains, climbing by about 173% and 123%, respectively, during the same period.

Though each of these stocks has experienced a tremendous rally, their strong fundamentals and share price catalysts suggest they could each have more room to run. We'll explore both in detail and also consider some of the risks each stock presents.

Expansion Into AI Provides Significant Momentum for Innodata

Data engineering and AI firm Innodata provides content and other services to media companies, legal organizations, and a range of other clients. Its recent shift toward the enterprise AI stack allows it to carve out a specialized niche not occupied by other larger AI companies. With strong new deals and a solid pipeline, Innodata managed to improve revenue by an impressive 79% year-over-year (YOY) for the most recent quarter, also boosting adjusted EBITDA by 375% in the process. The company came out well ahead of analyst expectations on the bottom line as well, posting 20 cents in EPS compared with an expected 11 cents.

Innodata is positioning itself as a go-to source for high-accuracy data service at a time when AI applications are demanding more and more of these tools. Even better for the firm, it has managed so far to navigate around the complex web of customer relationships in the tech space, which should allow it to retain customers in a competitive advantage over some of its rivals. Innodata's competitor Scale AI, for example, has experienced a backlash from some companies that have cut ties following its major partnership with Meta Platforms Inc. NASDAQ: META.

With all of these drivers of growth, and given the impressive recent rally, investors may be skeptical that Innodata still has room to climb further. However, the company's value metrics are not off the chart for the industry: it has a P/E ratio of 70.5 and a P/S ratio of 16.3. Four out of five analysts rating INOD shares agree that the company is a Buy.

Dominance in the In-Flight Power Infrastructure Space Boost's Astronic's Prospects

A maker of aerospace, defense and semiconductor technologies, Astronics faced losses for a prolonged period before recently turning around its financials and returning to profitability. Strong results from the company's aerospace segment have driven this performance; Astronics reported record sales of $194 million in this area for the latest quarter, a 9% YOY improvement. At the same time, it has also improved its margin (adjusted operating margin climbed by 300 basis points YOY in the last quarter to 16.3%, while fairly strong free cash flow has allowed Astronics to strengthen its balance sheet.

Where Astronics shines is in its in-flight connectivity infrastructure. The company dominates about 90% of the market for in-cabin power systems. Airlines are increasingly relying on customers bringing their own devices on-board to view in-flight entertainment options, meaning that Astronics' power infrastructure is likely to only get more popular over time. At the same time, its positioning in the defense sector will allow it to benefit from increases in spending by the U.S. government.

With prudent financial management and a strong presence in several high-demand markets, Astronics has received a Moderate Buy rating from analysts reviewing ATRO shares.

Beware Risks That Remain

Both Innodata and Astronics carry risks that investors should keep in mind. Innodata is reliant on AI demand, leaving it vulnerable to a potential bubble pop, and it has also historically faced significant price volatility. And despite the fact that Astronics has improved its financial position, it has a recent history of losses and could be heavily impacted by a shifting tariff landscape, supply chain issues, and similar concerns.

Despite these concerns, though, many signs suggest INOD and ATRO could continue to solidly outperform the market, making them worthy of investor consideration for their potential as momentum plays heading into the end of 2025.