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Inogen, Inc. INGN is well poised for growth in the coming quarters, backed by its high prospects in the portable oxygen concentrators (POCs) space. Solid performance in the second quarter of 2021 and a strong product portfolio also buoy optimism. Headwinds resulting from Medicare and foreign exchange fluctuations are major downsides.
Over the past year, the Zacks Rank #3 (Hold) stock has gained 60.4% compared with the 19.2% growth of the industry and 35.5% rise of the S&P 500.
The renowned provider of POCs has a market capitalization of $1.05 billion. The company projects 64.1% growth for 2022 and expects to witness continued improvements in its business. Inogen surpassed the Zacks Consensus Estimates in three of the trailing four quarters and missed the same in one, delivering an earnings surprise of 19.10%, on average.
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Let’s delve deeper.
High Prospects in the POC Space: We are optimistic about the POCs’ superiority to conventional oxygen therapy (known as delivery model). POCs provide unlimited oxygen supply anywhere, thereby enhancing patient independence and mobility. The stimulus bill (passed in December 2020) includes two provisions associated with oxygen therapy with respect to reimbursement rates. Management at Inogen views both of these to have an incremental positive impact on its industry and POC adoption.
Moreover, POCs are less expensive in comparison to traditional therapies as these systems do not require physical infrastructure, and also because of the service intensity of the delivery model. We believe that the inherent benefits of Inogen One systems against the delivery model will help the company penetrate the long-term oxygen therapy market considerably faster than its competitors.
Strong Product Portfolio: We are optimistic about Inogen’s expanding product portfolio. The company provides oxygen concentrator solutions for portable and stationary use. Inogen’s flagship product, Inogen One G4, is a single-solution POC. Other notable products offered by the company include Inogen One G5 in the domestic business-to-business arm and Inogen One G3 POC. Inogen has officially launched the Inogen One G5 in its direct-to-consumer channel as well. Inogen At Home is aptly formulated for patients who need oxygen therapy while asleep.
Strong Q2 Results: Inogen’s better-than-expected results in second-quarter 2021 buoy optimism. The company saw growth in revenues within its segments. In the reported quarter, Inogen witnessed strength across direct-to-consumer, domestic business-to-business and international business-to-business segments. The significant expansion in gross margin is another plus. The company delivered record revenues in the second quarter.
Medicare Headwinds: The Centers for Medicare & Medicaid Services (“CMS”) has issued a final rule which requires Medicare prior authorization for certain durable medical equipment, prosthetics, orthotics and supplies (“DMEPOS”) that the agency characterizes as “frequently subject to unnecessary utilization.” After a temporary pause, CMS resumed full operations for the national prior-authorization program for certain DMEPOS, effective Aug 3, 2020. If Inogen’s products are subject to prior authorization, it could reduce the number of patients qualified to come on service using their Medicare benefits. This could delay the start of those patients while the company waits for the prior authorization. It could also decrease sales productivity. These could adversely affect the company’s business, financial conditions and results of operations.
Forex Woes: Inogen generates a significant portion of its revenues from the international market. Management expects international revenues to remain lumpy 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.
Inogen has been witnessing an upward estimate revision trend for 2021. Over the past 90 days, the Zacks Consensus Estimate for its loss per share has narrowed from a loss of 43 cents per share to a loss of 39 cents per share.
The Zacks Consensus Estimate for third-quarter 2021 revenues is pegged at $87.4 million, suggesting a 17.5% rise from the year-ago reported number.
Some better-ranked stocks from the broader medical space are Henry Schein, Inc. HSIC, IDEXX Laboratories, Inc. IDXX and West Pharmaceutical Services, Inc. WST.
Henry Schein’s long-term earnings growth rate is estimated at 13.9%. The company presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
IDEXX’s long-term earnings growth rate is estimated at 19.9%. It currently has a Zacks Rank #2.
West Pharmaceutical’s long-term earnings growth rate is estimated at 27.3%. It currently flaunts a Zacks Rank #1.
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Henry Schein, Inc. (HSIC) : Free Stock Analysis Report
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