Insulet Corp (PODD, Financial) recently experienced a daily gain of 15.89% and a 3-month loss of 38.95%. Despite these fluctuations, the company reported an Earnings Per Share (EPS) of 0.89. This raises the question: is the stock significantly undervalued? In this article, we'll delve into a comprehensive valuation analysis of Insulet (PODD), providing you with valuable insights for informed investment decisions.
Company Overview
Founded in 2000, Insulet Corp (PODD, Financial) was established with the objective of simplifying continuous subcutaneous insulin infusion therapy for diabetes. The company's flagship product, the Omnipod system, is a compact, disposable insulin infusion device that can be operated through a smartphone. Since its approval by the U.S. Food and Drug Administration in 2005, the Omnipod has been adopted by approximately 360,000 insulin-dependent diabetics worldwide. Despite a current stock price of $162.76, the GuruFocus Value (GF Value) estimates the fair value of Insulet at $379.33, suggesting that the stock may be significantly undervalued.
Understanding the GF Value
The GF Value is a proprietary measure that estimates the intrinsic value of a stock. It takes into account historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides a visual representation of the stock's ideal fair trading value. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Given Insulet's current price of $162.76 per share and a market cap of $11.40 billion, the stock appears to be significantly undervalued according to the GF Value. This suggests that the long-term return of its stock is likely to be much higher than its business growth.
Financial Strength
Investing in companies with low financial strength can result in permanent capital loss. Therefore, it's crucial to assess a company's financial strength before deciding whether to buy shares. Insulet has a cash-to-debt ratio of 0.46, ranking lower than 77.7% of 834 companies in the Medical Devices & Instruments industry. Based on this, GuruFocus ranks Insulet's financial strength as 5 out of 10, suggesting a fair balance sheet.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors. Insulet has been profitable 5 out of the past 10 years. Over the past twelve months, the company had a revenue of $1.50 billion and an Earnings Per Share (EPS) of $0.89. Its operating margin is 5.82%, which ranks better than 57.42% of 829 companies in the Medical Devices & Instruments industry. Overall, the profitability of Insulet is ranked 6 out of 10, indicating fair profitability.
Growth is a crucial factor in the valuation of a company. Companies that grow faster create more value for shareholders, especially if that growth is profitable. Insulet's average annual revenue growth is 16.4%, ranking better than 70.62% of 725 companies in the Medical Devices & Instruments industry. However, its 3-year average EBITDA growth is 8.1%, which ranks worse than 52.07% of 726 companies in the same 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. For the past 12 months, Insulet's return on invested capital is 5.68, and its cost of capital is 9.49.
Conclusion
In summary, the stock of Insulet (PODD, Financial) is believed to be significantly undervalued. The company's financial condition is fair, and its profitability is fair. Its growth ranks worse than 52.07% of 726 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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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
