Insulet Corp. (NASDAQ:PODD) Embodies a Proven Growth Investing Strategy

In growth investing, methods that use a fixed process to find firms with rising business speed are highly valued. One such ordered method is described in Louis Navellier's The Little Book That Makes You Rich, which lists eight basic rules for choosing better growth stocks. The process centers on specific financial measures that show a firm is not only expanding, but doing so with rising effectiveness and forward motion that often comes before large stock price gains. This method filters for good earnings estimate changes and surprises, rising sales and earnings expansion, increasing profit, good cash flow creation, and a high return on equity.

A present example that meets this strict filter is Insulet Corp. (NASDAQ:PODD), a medical device firm known for its Omnipod tubeless insulin delivery system. An examination of its latest financial results shows why it matches Navellier's growth-centered rules so well.

Matching the Eight Rules for Growth

The center of the "Little Book" method is its eight rules, and Insulet's latest results show force across several important parts.

• Good Earnings Estimate Changes & Surprises: Analyst belief is a key signal. Insulet shows an average EPS surprise of 16.19% over the last four quarters, with good surprises in all four reports. Also, analysts have increased their estimates for the next quarter by 10.80% over the last three months. These upward changes are important, as they imply the basic business force is beating even hopeful forecasts, a main factor for growth investors.

• Rising Sales and Earnings Expansion: Pure expansion is a requirement. Insulet's revenue increased 27.12% year-over-year, with last quarter's sales jumping 29.86% compared to the same time last year. More importantly, the method looks for a rise in speed. Insulet's earnings expansion is speeding up noticeably, with last quarter's EPS increasing 37.78% year-over-year, a large rise from the 26.76% expansion reported in the similar quarter a year before. This rising speed is exactly what the method tries to find early.

• Increasing Profit and Good Cash Flow: Growing sales are most useful when they become more profitable. Insulet's operating margin grew by 12.32% over the past year, showing the firm is scaling well. Even more notable is its cash flow creation; Insulet's free cash flow increased by a remarkable 2,854.73% over the past year. This large rise in cash creation supplies the means for more new ideas, growth, or shareholder benefits, meeting the rule needing "good cash flow."

• High Return on Equity: Finally, the method looks for firms that create excellent returns on shareholder money. Insulet's return on equity (ROE) is at a solid 17.79%, easily passing the 10% level set by the filter. This shows management is using capital well to create profits.

Basic Health and Price Setting

Beyond the specific filter rules, a wider basic study of Insulet gives setting. According to a detailed basic report, the firm gets a strong total score of 7 out of 10. Its profit is scored as excellent, led by industry-best margins and returns on capital. Financial health is good, with a strong balance sheet and acceptable liquidity. The expansion score is top-level, with forceful past growth in both revenue and earnings expected to keep going at a strong rate in the near future.

The main area for thought is price setting. The stock sells at a high earnings multiple, which is common for firms showing such fast expansion. The study states that while the stock seems costly next to the wider market, its price is more fair when looked at next to its industry group and can be explained by its top-level expansion and profit picture.

A Clear Growth Example

Insulet Corp. offers a clear example of a firm that fits an ordered growth investing plan. It shows the forceful mix of speeding top-line expansion, quickly increasing bottom-line profit, and excellent cash creation that the "Little Book" method tries to find. For investors using this process, PODD shows the kind of basic motion that can lead long-term investment results.

It is key to note that a filter result is a beginning for more study, not a final buy suggestion. The market always shows new chances, and investors can find the newest list of stocks meeting this "Little Book" filter by viewing and changing the filter here.

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Disclaimer: This article is for information only and does not form financial guidance, a suggestion, or an offer or request to buy or sell any securities. The information shown should not be used as the only base for any investment choice. Investors should do their own full research and talk with a skilled financial guide before making any investment choices. Past results are not a guide for future results.