Insulet (PODD)

Insulin delivery company Insulet Corporation (NASDAQ:PODD) reported Q1 CY2025 results beating Wall Street’s revenue expectations, with sales up 28.8% year on year to $569 million. On top of that, next quarter’s revenue guidance ($608.2 million at the midpoint) was surprisingly good and 5.5% above what analysts were expecting. Its non-GAAP profit of $1.02 per share was 29.7% above analysts’ consensus estimates.

Company Overview

Revolutionizing diabetes care with its tubeless "Pod" technology, Insulet (NASDAQ:PODD) develops and manufactures innovative insulin delivery systems for people with diabetes, primarily through its Omnipod product line.

Patient monitoring companies within the healthcare equipment industry offer devices and technologies that track chronic conditions and support real-time health management, such as continuous glucose monitors (CGMs) and sleep apnea machines. These businesses benefit from recurring revenue from consumables and software subscriptions tied to device sales (razor, razor blade model). The rising prevalence of chronic diseases like diabetes and respiratory disorders due to an aging population as well as growing adoption of digitization are good for the industry. However, these companies face challenges from high R&D costs and reliance on regulatory approvals. Looking ahead, the sector is positioned for growth due to tailwinds like the rising burden of chronic diseases from an aging population, the shift toward value-based care, and increased adoption of digital health solutions. Innovations in AI and machine learning are expected to enhance device accuracy and functionality, improving patient outcomes and driving demand. However, there are headwinds such as pricing pressures as healthcare costs are a key focus, especially in the US. An evolving regulatory landscape and competition from more tech-forward new entrants could present additional challenges.

Insulet's main competitors in the insulin pump market include Medtronic's MiniMed division (NYSE:MDT) and Tandem Diabetes Care (NASDAQ:TNDM), both of which offer traditional tubed insulin pump systems.

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With just $2.2 billion in revenue over the past 12 months, Insulet lacks scale in an industry where it matters. This makes it difficult to build trust with customers because healthcare is heavily regulated, complex, and resource-intensive. On the bright side, Insulet’s smaller revenue base allows it to grow faster if it can execute well.

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, Insulet’s 23.1% annualized revenue growth over the last five years was excellent. Its growth surpassed the average healthcare company and shows its offerings resonate with customers, a great starting point for our analysis.

Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. Insulet’s annualized revenue growth of 26.8% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

Insulet also reports sales performance excluding currency movements, which are outside the company’s control and not indicative of demand. Over the last two years, its constant currency sales averaged 26.6% year-on-year growth. Because this number aligns with its normal revenue growth, we can see that Insulet has properly hedged its foreign currency exposure.

This quarter, Insulet reported robust year-on-year revenue growth of 28.8%, and its $569 million of revenue topped Wall Street estimates by 4.8%. Company management is currently guiding for a 24.5% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 15.8% over the next 12 months, a deceleration versus the last two years. Still, this projection is noteworthy and indicates the market is baking in success for its products and services.

Insulet has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 11.1%, higher than the broader healthcare sector.

Looking at the trend in its profitability, Insulet’s operating margin rose by 9.2 percentage points over the last five years, as its sales growth gave it operating leverage. This performance was mostly driven by its recent improvements as the company’s margin has increased by 13.5 percentage points on a two-year basis. These data points are very encouraging and shows momentum is on its side.

This quarter, Insulet generated an operating profit margin of 15.6%, up 2.7 percentage points year on year. This increase was a welcome development and shows it was more efficient.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Insulet’s EPS grew at an astounding 114% compounded annual growth rate over the last five years, higher than its 23.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Insulet’s earnings to better understand the drivers of its performance. As we mentioned earlier, Insulet’s operating margin expanded by 9.2 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q1, Insulet reported EPS at $1.02, up from $0.73 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Insulet’s full-year EPS of $3.62 to grow 22.1%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Insulet has shown mediocre cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3%, subpar for a healthcare business.

Taking a step back, an encouraging sign is that Insulet’s margin expanded by 21.9 percentage points during that time. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability.

Insulet’s free cash flow clocked in at $51.5 million in Q1, equivalent to a 9.1% margin. The company’s cash profitability regressed as it was 5.8 percentage points lower than in the same quarter last year, but it’s still above its five-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, leading to short-term swings. Long-term trends carry greater meaning.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Insulet’s five-year average ROIC was 12.5%, higher than most healthcare businesses. This illustrates its management team’s ability to invest in profitable growth opportunities and generate value for shareholders.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Insulet’s ROIC has increased. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.

Insulet reported $1.28 billion of cash and $1.7 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $502 million of EBITDA over the last 12 months, we view Insulet’s 0.8× net-debt-to-EBITDA ratio as safe. We also see its $3 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Insulet blew past analysts’ constant currency revenue, EPS, and EBITDA expectations this quarter. We were also excited its quarterly revenue guidance outperformed Wall Street’s estimates. Zooming out, we think this was a solid print. The stock traded up 8.9% to $280 immediately following the results.

Updated: May 22, 2025 at 11:37 PM EDT

Before deciding whether to buy Insulet or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

Insulet is a rock-solid business worth owning. For starters, its revenue growth was impressive over the last five years. On top of that, its constant currency growth has been marvelous, and its rising cash profitability gives it more optionality.

Insulet’s P/E ratio based on the next 12 months is 72.6x. Expectations are high given its premium multiple, but we’ll happily own Insulet as its fundamentals shine bright. We’re in the camp that investments like this should be held for at least three to five years to negate the short-term price volatility that can come with high valuations.

Wall Street analysts have a consensus one-year price target of $328.73 on the company (compared to the current share price of $317.60).

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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