Insulet Corp (NASDAQ:PODD) Passes Stringent Growth Screen

A systematic method for growth investing can help investors find companies with strong fundamental momentum. One such system comes from Louis Navellier's "The Little Book That Makes You Rich," which lists eight specific rules for choosing leading growth stocks. These rules concentrate on earnings revisions, sales and earnings growth, margin expansion, cash flow generation, and return on equity. When used with a stock screener, this approach can identify companies showing exceptional operational and financial performance, such as Insulet Corp (NASDAQ:PODD).

Positive Earnings Revisions and Surprises

A key part of Navellier's system involves finding companies where analyst expectations are increasing, as upward revisions frequently point to underlying operational strength. Insulet meets this condition with a 4.26% rise in the next quarter's EPS estimate over the past three months. Also, the company has shown a capacity to consistently beat expectations, a characteristic highly regarded by growth investors.

• All four of the last quarterly earnings reports exceeded analyst estimates.
• The average earnings surprise over this period was a significant 18.52%.

This sequence of positive surprises is important because it often makes analysts re-assess their future earnings models, possibly leading to higher price targets as future profit expectations are adjusted upward.

Accelerating Sales and Earnings Growth

The system requires companies to display not just growth, but increasing momentum in both sales and profits. Insulet's recent performance shows strong traction on both fronts.

• Quarterly revenue grew 29.86% compared to the same quarter last year.
• Full-year revenue growth is 27.12%.
• Quarterly EPS increased 37.78% year-over-year.
• Full-year EPS growth is a solid 27.65%.

This acceleration is a central principle of the system. The screener specifically verifies that the most recent quarterly EPS growth (37.78%) is higher than the growth from the comparable quarter a year before (26.76%), confirming positive earnings momentum.

Expanding Profitability and Strong Cash Generation

For a growth company, rising sales must lead to improved profitability. Navellier's screen searches for expanding operating margins, showing that revenue growth is not happening at the cost of profitability. Insulet's operating margin grew by a notable 18.54% over the past year. Even more impressive is the company's cash flow generation.

• Free cash flow increased greatly, rising by 1,593.75% over the past twelve months.

Strong and increasing cash flow gives a company the financial flexibility to fund its own expansion, research, and development without heavy dependence on external financing, making it a crucial element of sustainable growth.

High Return on Equity

The final rule requires a high return on equity (ROE), which calculates how efficiently a company generates profits from shareholder investments. Insulet meets this requirement with an ROE of 16.14%, well above the system's 10% minimum. A high ROE indicates that management is using capital effectively to create value, a sign of a well-run growth company.

Fundamental Analysis Overview

Insulet's overall fundamental profile matches well with a growth investing system. The company gets a solid rating of 7 out of 10, with especially high scores in growth (9/10) and profitability (8/10). While its valuation metrics seem high on a standalone basis, this is often true for high-growth companies and is partly explained by its exceptional profitability and growth path. For a detailed breakdown of these metrics, you can examine the full fundamental analysis report for PODD.

Conclusion

Insulet Corp presents a strong example of a company that passes a strict, rules-based growth screen. Its solid performance across earnings revisions, sales and profit growth, margin expansion, cash flow, and return on equity indicates it has the fundamental momentum that growth investors like Louis Navellier look for. While the stock's valuation needs careful thought, its operational strength is clear.

This review of Insulet was found using a screen based on "The Little Book That Makes You Rich." To see other companies currently passing this growth-focused system, you can view the live screen results here.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer or solicitation to buy or sell any securities. All investment decisions should be based on your own research, financial situation, and risk tolerance.