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Here's Why You Should Retain Inogen in Your Portfolio Now

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·4 min read
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Inogen, Inc. INGN is gaining on solid product portfolio expansion and strong momentum in European markets. However, forex headwinds have been offsetting the positives to some extent.

The company, with a market capitalization of $662.9 million, is a leading manufacturer of portable oxygen concentrators (POCs). The company’s earnings have improved 41.2% over the past five years. Also, this Zacks Rank #3 (Hold) company has a trailing four-quarter earnings surprise of 71.2%, on average.

In the past three months, the stock has lost 22.2% against the 13.8% growth of its industry.

Let’s delve deeper into the factors working in favor of the company.

Focus on Europe: Inogen is optimistic about continued revenue generation in Europe. The company expects tender activity to improve in the region and its partners to continue to adopt POCs. In fact, management foresees large long-term opportunities ahead, courtesy of market transitions from tank and liquid oxygen systems to non-delivery solutions.

Further, Inogen continues to gain from the production of Inogen One G3 concentrators in collaboration with contract manufacturer, Foxconn, located in the Czech Republic. Inogen also expects Foxconn to produce the vast majority of the Inogen One G3 concentrators required to support demand in Europe. Also, Inogen plans to start manufacturing the recently-launched Inogen One G5 in Czech Republic in the first half of 2020 for European customers.

Strong Product Portfolio: Inogen’s expanding product portfolio is a key catalyst. The company provides oxygen concentrator solutions for portable and stationary use. Inogen’s flagship product, One G4, is a single-solution POC. Recently, the company launched the Inogen One G5 in the domestic business-to-business arm as well as direct-to-consumer channel.

In fact, the company applied for CE marking for the Inogen One G5 and has begun shipments to international customers.

Apart from this, Inogen One G3 portable oxygen concentrator brings mobility and independence to oxygen therapy users. Inogen At Home is aptly formulated for patients who need oxygen therapy during sleep.

A sequential increase of patient interest in the company’s products was observed sequentially in May and June 2020.

Unique Direct-to-Customer Business Model: Despite a soft show in the second quarter of 2020, Inogen’s direct-to-customer business model has lent it a leading position in the oxygen therapy market. 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 growing direct-to-customer sales and marketing efforts help in increasing awareness among patients. Growth in physician referrals in this segment is also expected to boost the top line over the long term.

However, there is a factor marring growth.

Forex Woes: Inogen generates a significant portion of revenues from the 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.

Estimate Trend

For 2020, the Zacks Consensus Estimate for revenues is pegged at $311.6 million, indicating a decline of 13.9% from the prior-year period. The same for loss stands at 8 cents per share.

Key Picks

A few better-ranked stocks from the broader medical space include OPKO Health OPK, Surmodics SRDX and Merit Medical Systems MMSI.

OPKO Health’s long-term earnings growth rate is estimated at 12%. 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.

Surmodics’ long-term earnings growth rate is estimated at 10%. The company presently carries a Zacks Rank #2.

Merit Medical Systems’ long-term earnings growth rate is estimated at 11.9%. It currently carries a Zacks Rank #2.

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