Insulet Corp (PODD, Financial) experienced a daily loss of -3.59%, with a 3-month loss of -29.88% and an Earnings Per Share (EPS) of 0.89. This raises the question: is the stock significantly undervalued? The following evaluation delves into the company's valuation, financial strength, and growth prospects to provide a comprehensive answer.
Company Introduction
Founded in 2000, Insulet Corp (PODD, Financial) aimed to simplify continuous subcutaneous insulin infusion therapy for diabetes. This led to the creation of the Omnipod system, a small disposable insulin infusion device controlled via a smartphone for dosage regulation. Since its FDA approval in 2005, it has been used by approximately 360,000 insulin-dependent diabetics worldwide. The company currently has a market cap of $15.70 billion with sales of $1.50 billion.
At a stock price of $225.28, it's crucial to compare this with the company's estimated fair value, or GF Value, of $363.48. This comparison will provide a clearer picture of the stock's valuation.
Understanding GF Value
The GF Value is a proprietary measure that estimates a stock's intrinsic value. It's based on historical trading multiples, a GuruFocus adjustment factor considering past performance and growth, and future business performance estimates. The GF Value Line represents the ideal fair trading value of the stock.
Insulet (PODD, Financial) is significantly undervalued according to the GF Value calculation. This implies that the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength
It's crucial to assess a company's financial strength before investing. Companies with poor financial strength pose a higher risk of permanent loss. Insulet's cash-to-debt ratio of 0.46 is worse than 77.66% of companies in the Medical Devices & Instruments industry. Its overall financial strength is fair, scoring 5 out of 10.
Profitability and Growth
Investing in profitable companies carries less risk, especially if they consistently demonstrate profitability. Insulet has been profitable 5 years over the past 10 years. Its operating margin of 5.82% is better than 58.23% of companies in the Medical Devices & Instruments industry. Overall, GuruFocus ranks Insulet's profitability as fair.
Growth is a vital factor in company valuation. Insulet's 3-year average revenue growth rate is better than 70.86% of companies in the Medical Devices & Instruments industry. However, its 3-year average EBITDA growth rate is 8.1%, ranking worse than 51.86% of companies in the industry.
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. Insulet's ROIC is 5.68 while its WACC is 8.93. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders.
Conclusion
In conclusion, Insulet (PODD, Financial) appears to be 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 stock, you can check out its 30-Year Financials here.
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