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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 its solid product portfolio expansion and strong momentum within European markets. However, forex headwinds have been offsetting the positives to some extent.

The company, with a market capitalization of $816.9 million, is a leading manufacturer of portable oxygen concentrators (POC). The company’s earnings improved 41.2% over the past five years. Also, this Zacks Rank #3 (Hold) company has a trailing four-quarter positive earnings surprise of 6.2%, on average.

In the past three months, the stock has lost 21.4% against the 2.7% growth of its industry.

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

Focus on Europe: Inogen is optimistic about revenue generation in Europe starting the first half of 2020. 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 opportunity 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.

In the first quarter of 2020, surging demand pertaining to the COVID-19 PHE led to increased sales in Europe.

Product Portfolio Strength: 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.

In the first quarter of 2020, the company witnessed an increase in product sales mix toward Inogen One G5, which remained higher priced than Inogen One G3.

Management also confirmed Inogen’s plan of incorporating the Tidal Assist Ventilator directly into the Inogen One Portable Oxygen Concentrators and making the SideKick TAV product compatible with the Inogen At-Home Stationary Concentrator.

Unique Direct-to-Customer Business Model: Despite a soft show in the first 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

The company is witnessing a negative estimate revision trend for 2020 earnings. Over the past 30 days, the Zacks Consensus Estimate for the same has slipped to a loss of 7cents per share from earnings of 70 cents per  share.

The Zacks Consensus Estimate for the company’s second-quarter 2020 revenues is pegged at $81.2 million, suggesting a 19.7% fall from the year-ago reported number.

Key Picks

Some better-ranked stocks from the broader medical space are Aphria APHA, DexCom DXCM and HMS Holdings HMSY.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Aphria’s long-term earnings growth rate is estimated at 24.6%. The company presently carries a Zacks Rank #2 (Buy).

DexCom’s long-term earnings growth rate is estimated at 36.3%. The company presently carries a Zacks Rank #2.

HMS Holdings’ long-term earnings growth rate is estimated at 10%. It currently carries a Zacks Rank #2.

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