Stock Analysis

Does Insulet (NASDAQ:PODD) Deserve A Spot On Your Watchlist?

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NasdaqGS:PODD
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It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Insulet (NASDAQ:PODD). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Insulet

How Fast Is Insulet Growing Its Earnings Per Share?

Over the last three years, Insulet has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like a wedge-tailed eagle on the wind, Insulet's EPS soared from US$0.28 to US$0.45, in just one year. That's a commendable gain of 64%.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Insulet's EBIT margins were flat over the last year, revenue grew by a solid 25% to US$868m. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

earnings-and-revenue-history
NasdaqGS:PODD Earnings and Revenue History December 8th 2020

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Insulet.

Are Insulet Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$16b company like Insulet. But we are reassured by the fact they have invested in the company. Notably, they have an enormous stake in the company, worth US$146m. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations over US$8.0b, like Insulet, the median CEO pay is around US$11m.

The Insulet CEO received US$5.9m in compensation for the year ending . That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Does Insulet Deserve A Spot On Your Watchlist?

You can't deny that Insulet has grown its earnings per share at a very impressive rate. That's attractive. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. Each to their own, but I think all this makes Insulet look rather interesting indeed. Before you take the next step you should know about the 3 warning signs for Insulet (1 shouldn't be ignored!) that we have uncovered.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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What are the risks and opportunities for Insulet?

Insulet Corporation develops, manufactures, and sells insulin delivery systems for people with insulin-dependent diabetes.

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Rewards

  • Earnings are forecast to grow 50.65% per year

  • Became profitable this year

Risks

  • Interest payments are not well covered by earnings

  • Significant insider selling over the past 3 months

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