Stock Analysis
- United States
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- Medical Equipment
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- NasdaqGS:PODD
Does Insulet (NASDAQ:PODD) Have The Makings Of A Multi-Bagger?
If you're looking for a multi-bagger, there's a few things to keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Insulet (NASDAQ:PODD) looks quite promising in regards to its trends of return on capital.
What is Return On Capital Employed (ROCE)?
For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Insulet is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.05 = US$77m ÷ (US$1.7b - US$175m) (Based on the trailing twelve months to September 2020).
So, Insulet has an ROCE of 5.0%. Ultimately, that's a low return and it under-performs the Medical Equipment industry average of 10.0%.
See our latest analysis for Insulet
Above you can see how the current ROCE for Insulet compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Insulet.
What Does the ROCE Trend For Insulet Tell Us?
We're delighted to see that Insulet is reaping rewards from its investments and is now generating some pre-tax profits. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 5.0% on its capital. Not only that, but the company is utilizing 558% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.
In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 10%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. So this improvement in ROCE has come from the business' underlying economics, which is great to see.Our Take On Insulet's ROCE
In summary, it's great to see that Insulet has managed to break into profitability and is continuing to reinvest in its business. And a remarkable 547% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.
One final note, you should learn about the 3 warning signs we've spotted with Insulet (including 1 which makes us a bit uncomfortable) .
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.
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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.
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
Further research on
Insulet
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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About NasdaqGS:PODD
Insulet
Insulet Corporation develops, manufactures, and sells insulin delivery systems for people with insulin-dependent diabetes.
High growth potential with acceptable track record.
