On Tuesday, Wolfe Research raised its rating on shares of Insulet (NASDAQ:PODD) Corporation (NASDAQ:PODD) from Peerperform to Outperform, setting a price target of $200.00. The new rating reflects a positive outlook on the company's long-term growth potential, particularly in the diabetes care market.
The firm's decision is based on a comprehensive evaluation using a discounted cash flow (DCF) model that extends over two decades, projecting market trends and company performance until after 2040. This extended model considers various factors, including market penetration rates and Insulet's share in different segments of the diabetes care market.
According to the analysis, Insulet is expected to achieve a 40% market share in both the US and overseas Type 1 diabetes markets over time. For Type 2 diabetes, where Insulet offers a unique basal insulin delivery product, the firm predicts the company could secure over 50% market share. These projections are underpinned by assumptions of a 30% terminal margin and a 3% long-term growth rate, with cash flows discounted at 9%.
The research firm also compared Insulet's valuation to sector growth counterparts and historical data, noting that Insulet's current trading levels are relatively modest. When looking at 2025 revenue multiples, Insulet trades at approximately 6 times, which is in the bottom quartile historically.
Comparable companies with 15%-25% growth are trading between 7 and 13 times their 2025 revenue. Additionally, on a real EBITDA basis, including stock compensation, Insulet's multiple is around 30 times for 2025, compared to peers like DexCom, Intuitive Surgical (NASDAQ:ISRG), and ShockWave Medical, which are around 40 times.
The upgrade and price target are supported by a detailed DCF analysis included as an appendix to the research note, which provides a long-term perspective on Insulet's financial prospects and market positioning.
InvestingPro Insights
Insulet Corporation's (NASDAQ:PODD) valuation and growth prospects have recently been highlighted by Wolfe Research, and real-time data from InvestingPro further enriches this perspective. The company's market capitalization stands at $12.35 billion, reflecting its significant presence in the healthcare sector. Despite trading at a high earnings multiple with a P/E ratio of 59.58, which is adjusted to 56.34 for the last twelve months as of Q4 2023, Insulet's financial health appears robust. This is supported by a substantial revenue growth of 30.02% over the same period, indicating a strong upward trajectory in earnings.
InvestingPro Tips suggest that Insulet has the liquidity to meet short-term obligations, as its liquid assets exceed its short-term liabilities. Additionally, the company operates with a moderate level of debt, which is a positive sign for investors concerned about financial stability. With analysts predicting profitability for the current year and a profitable track record over the last twelve months, Insulet's financials seem to align with the growth potential identified by Wolfe Research.
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