With a daily loss of -4.98%, a 3-month loss of -21.64%, and an Earnings Per Share (EPS) (EPS) of 0, Insulet Corp (PODD, Financial) raises the question: Is the stock significantly undervalued? This article will provide an in-depth analysis of Insulet's valuation and financial strength. Read on to gain valuable insights into this Medical Devices & Instruments industry player.
Company Introduction
Established in 2000, Insulet Corp (PODD, Financial) aimed to simplify continuous subcutaneous insulin infusion therapy for diabetes. The result was the Omnipod system, a small disposable insulin infusion device that can be operated through a smartphone to control dosage. Since its approval by the U.S. Food and Drug Administration in 2005, the Omnipod system is now used by approximately 360,000 insulin-dependent diabetics worldwide.
With a current stock price of $247.85, Insulet's GF Value, an estimation of its fair value, stands at $356.1. This discrepancy suggests that the stock may be significantly undervalued. The following analysis will delve deeper into the company's value, financial strength, profitability, and growth.
GF Value Summary
The GF Value is a proprietary measure of a stock's intrinsic value. It is calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the stock's ideal fair trading value.
According to GuruFocus' valuation method, Insulet (PODD, Financial) appears to be significantly undervalued. The GF Value estimates the stock's fair value based on historical multiples, internal adjustments based on past business growth, and analyst estimates of future business performance. If the share price is significantly above the GF Value Line, the stock may be overvalued and future returns may be poor. Conversely, if the share price is significantly below the GF Value Line, the stock may be undervalued and future returns may be higher. Given Insulet's current price of $247.85 per share, the stock appears significantly undervalued.
Because Insulet is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss to investors. To avoid this, it's crucial to review a company's financial strength before investing. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. Insulet has a cash-to-debt ratio of 0.44, ranking worse than 78.47% of companies in the Medical Devices & Instruments industry. The overall financial strength of Insulet is 5 out of 10, indicating fair financial strength.
Profitability and Growth
Consistent profitability over the long term generally means less risk for investors. Higher profit margins usually indicate a better investment compared to a company with lower profit margins. Insulet has been profitable 5 times over the past 10 years. In the past twelve months, the company had a revenue of $1.40 billion and Earnings Per Share (EPS) of $0. Its operating margin is 2%, ranking better than 51.94% of companies in the industry. Overall, Insulet's profitability is ranked 6 out of 10, indicating fair profitability.
Growth is one of the most important factors in the valuation of a company. If a company's business is growing, it usually creates value for its shareholders, especially if the growth is profitable. Conversely, if a company's revenue and earnings are declining, the value of the company will decrease. Insulet's 3-year average revenue growth rate is better than 70.82% of companies in the Medical Devices & Instruments industry. However, Insulet's 3-year average EBITDA growth rate is 8.1%, ranking worse than 51.8% of companies in the industry.
ROIC vs WACC
Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. Ideally, the ROIC should be higher than the WACC. For the past 12 months, Insulet's ROIC is 0.25, and its WACC is 8.92.
Conclusion
In conclusion, the stock of Insulet (PODD, Financial) appears to be significantly undervalued. The company's financial condition and profitability are fair, but its growth ranks worse than 51.8% of companies in the Medical Devices & Instruments industry. To learn more about Insulet stock, you can check out its 30-Year Financials here.
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