Unlocking the True Worth of Inspire Medical Systems (INSP): A Comprehensive Guide
Despite a daily loss of 1.96% and a 3-month loss of 35.33%, Inspire Medical Systems Inc (NYSE:INSP) reported a Loss Per Share of 1.44. This raises the question: is the stock significantly undervalued? By examining the company's valuation analysis, we can gain a clearer understanding of its intrinsic value and future prospects.
An Overview of Inspire Medical Systems
Inspire Medical Systems Inc operates as a medical technology company, focusing on the development and commercialization of minimally invasive solutions for patients with obstructive sleep apnea (OSA). It offers the Inspire system, a neurostimulation technology that provides a safe and effective treatment for moderate to severe obstructive sleep apnea. The firm primarily operates in the United States and Europe, with the majority of its revenue generated from the United States. The current stock price stands at $199.59, while the GF Value, an estimation of fair value, is $559.65. This discrepancy suggests that the stock might be significantly undervalued.
Decoding the GF Value
The GF Value represents the current intrinsic value of a stock derived from our proprietary method. It is calculated based on historical trading multiples, a GuruFocus adjustment factor based on the company's past performance and growth, and future business performance estimates. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
With a market cap of $5.90 billion and a stock price of $199.59 per share, Inspire Medical Systems (NYSE:INSP) is believed to be significantly undervalued according to the GF Value calculation. This suggests that the long-term return of its stock is likely to be much higher than its business growth.
Assessing Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, it's crucial to review a company's financial strength before deciding to purchase shares. The cash-to-debt ratio and interest coverage of a company offer great insights into its financial strength. Inspire Medical Systems has a cash-to-debt ratio of 19.99, which ranks better than 75.8% of 843 companies in the Medical Devices & Instruments industry. The overall financial strength of Inspire Medical Systems is 8 out of 10, indicating strong financial health.
Profitability and Growth
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. Inspire Medical Systems has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $526.10 million and a Loss Per Share of $1.44. Its operating margin is -10.19%, which ranks worse than 58.22% of 833 companies in the Medical Devices & Instruments industry. Overall, GuruFocus ranks the profitability of Inspire Medical Systems at 3 out of 10, which indicates poor profitability.
Growth is a crucial factor in the valuation of a company. A faster-growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Inspire Medical Systems is 61.5%, which ranks better than 93.98% of 731 companies in the Medical Devices & Instruments industry. However, the 3-year average EBITDA growth rate is -4.1%, which ranks worse than 68.02% of 738 companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) is another way to evaluate its profitability. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Inspire Medical Systems's ROIC was -86.87, while its WACC came in at 13.15.
In conclusion, Inspire Medical Systems (NYSE:INSP) stock is believed to be significantly undervalued. The company's financial condition is strong, but its profitability is poor. Its growth ranks worse than 68.02% of 738 companies in the Medical Devices & Instruments industry. To learn more about Inspire Medical Systems stock, you can check out its 30-Year Financials here. To find out the high quality companies that may deliver above-average returns, please check out GuruFocus High Quality Low Capex Screener.
This article first appeared on GuruFocus.
