Sales Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, Insulet’s 22.9% annualized revenue growth over the last five years was excellent. Its growth beat the average healthcare company and shows its offerings resonate with customers, a helpful 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% 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 25.7% year-on-year growth. Because this number aligns with its normal revenue growth, we can see Insulet’s foreign exchange rates have been steady.

This quarter, Insulet reported year-on-year revenue growth of 17.2%, and its $597.5 million of revenue exceeded Wall Street’s estimates by 2.5%. Company management is currently guiding for a 23.5% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 16.7% over the next 12 months, a deceleration versus the last two years. Despite the slowdown, this projection is commendable and implies the market sees success for its products and services.

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Operating Margin

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.

Insulet has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 10.5%, 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 12 percentage points on a two-year basis. These data points are very encouraging and shows momentum is on its side.

In Q4, Insulet generated an operating profit margin of 18.3%, down 2.6 percentage points year on year. This contraction shows it was recently less efficient because its expenses grew faster than its revenue.

Earnings Per Share

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 77.9% compounded annual growth rate over the last five years, higher than its 22.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into Insulet’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Insulet’s operating margin declined this quarter but 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 Q4, Insulet reported EPS at $1.15, down from $1.40 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Insulet’s full-year EPS of $3.33 to grow 17.1%.

Key Takeaways from Insulet’s Q4 Results

We enjoyed seeing Insulet beat analysts’ constant currency revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, guidance for next quarter's revenue fell below expectations. The market seemed to want more this quarter, and the stock traded down 2.5% to $281.10 immediately following the results.

Is Insulet an attractive investment opportunity right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free .