Insulet Stock Jumps After Strong Q3 Earnings Report

Insulet stock (NASDAQ: PODD) saw a nearly 10% increase on Friday, November 8, following the company’s favorable Q3 results and an optimistic sales forecast. Insulet reported sales of $544 million and adjusted earnings of $0.90 per share, surpassing expectations of $518 million and $0.77, respectively. The company is experiencing growth thanks to the rising demand for its Omnipod insulin delivery system. Its newest product, Omnipod 5, is notably the only automated insulin delivery system approved for both type 1 and type 2 diabetes, having received U.S. FDA approval in August this year.

Significant Growth and Outlook

Insulet’s revenue of $544 million marks a 26% growth year-over-year, with U.S. Omnipod sales rising by 23% and international sales soaring by 36%. The increasing awareness of diabetes products and a growing aging population in the U.S. have fueled the demand for insulin products in recent years. Along with strong revenue growth, Insulet’s adjusted EBITDA margin increased 410 basis points year-over-year to 23.2% in Q3. This growth resulted in an adjusted earnings figure of $0.90, up from $0.71 in the same quarter last year. Looking ahead, the company has revised its sales growth expectations for 2024, now predicting an increase of 20% to 21%, up from a prior forecast of 16% to 19%.

Stock Performance and Market Comparisons

With a 23% gain this year, PODD stock has performed similarly to the broader S&P 500 index, which is up 25%. However, the stock has experienced volatility over the past three years, showing returns of 4% in 2021, 11% in 2022, and a decline of 26% in 2023. In comparison, the Trefis High Quality (HQ) Portfolio, composed of 30 stocks, has delivered consistent performance, outperforming the S&P 500 every year during the same timeframe. This suggests that HQ Portfolio stocks have provided better returns with less volatility.

Potential Future Challenges

As market conditions remain uncertain, particularly regarding changes in interest rates, it’s worth considering whether PODD could see fluctuations similar to those experienced in 2021 and 2023. Currently, from a valuation standpoint, PODD stock is adequately priced around $270, trading at 11x its trailing revenues, compared to its average price-to-sales (P/S) ratio of 14x over the past three years. Although PODD’s current valuation is slightly below its historical average, this decrease may be reasonable due to potential impacts from new GLP-1 diabetes drugs developed by Novo Nordisk and Eli Lilly. These medications could influence the demand for insulin pumps as they may broaden usage and reduce risks of cardiovascular events related to obesity.

Peer Comparisons and Investment Insights

While PODD seems to be appropriately valued, examining how Insulet’s peers perform can provide additional perspective on important metrics. Notably, for more comparisons across various industries, further valuable insights can be found at Peer Comparisons.

[1] Returns as of 11/11/2024
[2] Cumulative total returns since the end of 2016

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.