Insulet Corp (PODD, Financial), despite a daily loss of -3.59% and a 3-month loss of -29.88%, presents an intriguing investment opportunity. With an Earnings Per Share (EPS) (EPS) of 0.89, the question arises: is this stock significantly undervalued? This article provides a detailed valuation analysis of Insulet (PODD), encouraging readers to delve into the following comprehensive assessment.
Company Overview
Founded in 2000, Insulet Corp aimed to simplify continuous subcutaneous insulin infusion therapy for diabetes. The result was the Omnipod system, a small, disposable insulin infusion device operated through a smartphone. Approved by the U.S. Food and Drug Administration in 2005, it is now used by approximately 360,000 insulin-dependent diabetics worldwide. With a stock price of $225.28 and a GF Value of $356.46, is Insulet's stock undervalued?
Understanding GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line represents the ideal fair trading value of the stock.
According to GuruFocus Value calculation, Insulet (PODD, Financial) appears significantly undervalued. With a current price of $225.28 per share and a market cap of $15.70 billion, the long-term return of its stock is likely to be much higher than its business growth, given its undervalued status.
Insulet's Financial Strength
Investing in companies with poor financial strength can lead to a higher risk of permanent capital loss. Therefore, it's crucial to review a company's financial strength before investing. Insulet has a cash-to-debt ratio of 0.46, ranking lower than 77.66% of companies in the Medical Devices & Instruments industry. Its financial strength is rated 5 out of 10 by GuruFocus, indicating fair financial health.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, poses less risk. Insulet has been profitable 5 years over the past decade. With an operating margin of 5.82%, it ranks better than 58.23% of companies in its industry. Its profitability is rated 6 out of 10 by GuruFocus, indicating fair profitability.
Growth is a crucial factor in a company's valuation. Insulet's average annual revenue growth is 16.4%, ranking better than 70.86% of companies in its industry. However, its 3-year average EBITDA growth ranks lower than 51.86% of industry peers.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) can also evaluate its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate a company is expected to pay on average to finance its assets. If ROIC exceeds WACC, the company is likely creating value for its shareholders. Over the past 12 months, Insulet's ROIC was 5.68, while its WACC was 8.93.
Conclusion
In conclusion, Insulet shows every sign of being significantly undervalued. Its financial condition and profitability are fair, but its growth ranks lower than 51.86% of companies in the Medical Devices & Instruments industry. To learn more about Insulet's stock, check out its 30-Year Financials here.
For high-quality companies that may deliver above-average returns, check out the GuruFocus High Quality Low Capex Screener.
