Insulet (PODD): A Significantly Undervalued Gem in Medical Devices & Instruments Industry?

Delving into the valuation, financial strength, and growth prospects of Insulet Corp

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Insulet Corp (PODD, Financial) experienced a 3.3% daily gain, despite a 3-month loss of 26.1%. With an Earnings Per Share (EPS) of 0.89, the question arises: Is the stock significantly undervalued? This article seeks to answer this question through a comprehensive valuation analysis. We invite you to delve into our findings.

Company Overview

Established in 2000, Insulet Corp has dedicated itself to simplifying continuous subcutaneous insulin infusion therapy for diabetes. The result is the Omnipod system, a small disposable insulin infusion device operated through a smartphone to control dosage. Since its approval by the U.S. Food and Drug Administration in 2005, approximately 360,000 insulin-dependent diabetics are using it worldwide. With a current stock price of $237.26, Insulet has a market cap of $16.60 billion. The GF Value, an estimation of fair value, suggests that the stock is significantly undervalued.

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Understanding GF Value

The GF Value is a proprietary measure of a stock's intrinsic value. It's 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 on our summary page gives an overview of the fair value that the stock should be traded at.

According to our valuation method, Insulet (PODD, Financial) appears to be significantly undervalued. The GF Value estimates the stock's fair value based on historical multiples, an internal adjustment based on past business growth, and analyst estimates of future business performance. If the stock's share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. On the other hand, if the stock's share price is significantly below the GF Value Line, the stock may be undervalued and have high future returns.

Given that 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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Assessing Financial Strength

Investing in companies with poor financial strength carries a higher risk of permanent loss of capital. Thus, it is crucial to review the financial strength of a company before deciding to buy its stock. Insulet's cash-to-debt ratio of 0.44 is worse than 78.45% of companies in the Medical Devices & Instruments industry. GuruFocus ranks the overall financial strength of Insulet at 5 out of 10, indicating fair financial strength.

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Profitability and Growth

Companies that have been consistently profitable over the long term offer less risk for investors. Insulet has been profitable 5 over the past 10 years. Over the past twelve months, the company had a revenue of $1.50 billion and Earnings Per Share (EPS) of $0.89. Its operating margin is 2%, which ranks better than 51.82% of companies in the Medical Devices & Instruments industry. Overall, the profitability of Insulet is ranked 6 out of 10, indicating fair profitability.

One of the most important factors in the valuation of a company is growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Insulet is16.4%, which ranks better than 70.82% of companies in the Medical Devices & Instruments industry. The 3-year average EBITDA growth is 8.1%, which ranks worse than 51.8% of companies in the industry.

ROIC vs WACC

Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. 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. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Insulet's return on invested capital is 0.25, and its cost of capital is 8.84.

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Conclusion

In conclusion, the stock of Insulet (PODD, Financial) shows every sign of being significantly undervalued. The company's financial condition is fair, and its profitability is fair. 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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Disclosures

I/We may personally own shares in some of the companies mentioned above. However, those positions are not material to either the company or to my/our portfolios.