Inogen, Inc. INGN is gaining on solid product portfolio expansion, unique business model and growth in Europe. However, foreign exchange woes have been offsetting the positives to some extent.
The company, with a market capitalization of $1.09 billion, is the leading developer of portable oxygen concentrators (POC). The company anticipates earnings growthof.1% overthe next five years. Also, this Zacks Rank #3 (Hold) company has a trailing four-quarter negative earnings surprise of 7.2%, on average.
In the past six months, the stock has lost 4.5% compared with a 1.2% decline for the industry.
Let’s delve deeper into the factors working in favor of the company.
Unique Direct-to-Customer Business Model: Despite a soft show in the fourth quarter of 2019, Inogen’s direct-to-customer business model holds promise. In fact, management expects direct-to-consumer to be its fastest growing channel in 2020. The model gives companies an opportunity to build a unique brand relationship, directly with customers. The company recently signed a lease for its expansion site in Ohio to accelerate growth in the domestic direct-to-consumer sales channel.Growth in physician referrals in this segment is also expected to boost the top line over the long term.
Focus on Europe: Inogen is optimistic about revenue generation in Europe starting from the first half of 2020. The company expects tender activity to improve in the region and its partners to continue to adopt portable oxygen concentrators. In fact, management expects to see a large long-term opportunity ahead, courtesy of the market transitions from tank and liquid oxygen systems to non-delivery solutions.
Further, Inogen began production of Inogen One G3 concentrators in 2019 with the help ofa contract manufacturer, Foxconn, located in the Czech Republic. Inogen also expects Foxconn to produce the vast majority of the concentrators required to support demand in Europe.Inogen also plans to start manufacturing the recently-launched Inogen One G5 in Czech Republic in the first half of 2020 for customers in Europe.
Solid Product Portfolio: Inogen’s expanding product portfolio is a key catalyst. The company provides oxygen concentrator solutions for portable and stationary use. Its flagship product, One G4 is a single-solution POC. Recently, the company launched the Inogen One G5. In fact, the company applied for CE marking for the Inogen One G5 and has begun shipments to international customers.
However, there is a concerning factor marring growth.
Adverse Forex: Inogen generates a significant portion of revenues from their international market. Management expects international revenues to decline owing to the timing and size of the distributor. We also expect adverse foreign currency exchange rates to impede revenue growth in the near term owing to the strengthening of the U.S. dollar as against the euro and other foreign currencies.
The company has been witnessing a negative estimate revision trend for fiscal 2020 earnings. Over the past 60 days, the Zacks Consensus Estimate for the same has declined 6.6% to 70 centsper share.
The Zacks Consensus Estimate for the company’s first-quarter 2020 revenues is pegged at $83.4 million, suggesting a 7.6% fall from the year-ago quarter’s reported number.
Some better-ranked stocks from the broader medical space are ResMed Inc. RMD, Pacific Biosciences( PACB and Surmodics SRDX
ResMed has a projected long-term earnings growth rate of 12%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Pacific Biosciences’ long-term earnings growth rate is estimated at 30%. The company presently carries a Zacks Rank #2.
Surmodics’ long-term earnings growth rate is estimated at 10%. It currently carries a Zacks Rank #2.
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