Growth investing methods often look for companies not only increasing, but speeding up, with solid core business momentum. One organized way to find these stocks is described in Louis Navellier's "The Little Book That Makes You Rich," which lists eight basic rules for picking excellent growth stocks. These rules center on favorable earnings adjustments and surprises, quickening sales and earnings, widening profitability, solid cash flow, and high returns on equity. A recent filter using this system has pointed to Insulet Corp (NASDAQ:PODD) as a candidate for more review.
A Solid Fit for the Growth Standards
Insulet, the company that makes the Omnipod tubeless insulin pump system, seems to fit well with many of Navellier's main ideas. The filter's settings are made to find companies showing basic momentum, and Insulet's latest financial reports give clear proof of this pattern.
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Favorable Earnings Adjustments & Surprises: A central part of the method is that analyst estimate changes can be an early signal. Insulet shows a 9.59% rise for next quarter's EPS estimates over the last three months, hinting analysts are becoming more sure about its short-term future. Also, the company has a flawless history of beating forecasts, with four favorable earnings surprises in the last four quarters and an average beat of 16.19%. Steady outperformance can make analysts keep updating their models, possibly leading to future estimate rises.
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Solid and Quickening Growth: The method requires not only increase, but rising speeds of increase. Insulet's numbers here are strong:
- Sales Increase: Revenue increased 27.12% year-over-year and 29.86% quarter-over-quarter.
- Earnings Increase: EPS increased 27.65% year-over-year and 37.78% quarter-over-quarter.
- Earnings Momentum: Importantly, the current quarterly EPS increase of 37.78% is much greater than the 26.76% increase reported in the same quarter a year ago. This quickening is a main part of Navellier's system, showing positive momentum.
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Widening Profitability and Solid Cash Creation: Increase is most useful when it becomes more profitable. Insulet's operating margin widened by 12.32% over the past year, showing the company is scaling effectively. Even more notable is the cash flow view: Insulet's free cash flow jumped by a remarkable 2,854.73% over the past year. Solid and increasing cash flow supplies the means for more innovation, expansion, or shareholder benefits without needing outside funding.
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High Return on Equity: The last rule looks for effective use of shareholder money. Insulet's return on equity (ROE) is 17.79%, which is viewed as high and shows the company is creating significant profit from the equity investors have placed into the business.
Basic Health and Valuation Setting
A look at Insulet's wider basic analysis report gives setting. The company gets a solid total rating of 7 out of 10, with especially high marks in Growth (9) and Profitability (8). Its health score is acceptable at 7. The report confirms the strength seen in the filter, stating "exceptional health and profitability ratings" and that the company is "increasing strongly."
The main point of caution relates to valuation. With a P/E ratio over 60, the stock is costly on an absolute basis and compared to the wider S&P 500. However, the report also states that compared to its industry group in Health Care Equipment, Insulet's valuation is "moderately inexpensive," and its high projected earnings increase rate of over 28% may support its higher price over time for investors focused on growth.
A Candidate for More Study
For investors using a method like the one in "The Little Book That Makes You Rich," Insulet Corp offers a strong example. It shows multiple signs of basic momentum across sales, earnings, profitability, and cash flow, the very signs the system is made to find. While its valuation requires thoughtful review, the company's operational performance and market role in diabetes care make it a clear example of the kind of stock growth filters try to find.
This review of Insulet came from a filter created on Louis Navellier's eight rules. To see other companies currently passing this growth-oriented filter, you can see the complete list of results here.
Disclaimer: This article is for information only and is not financial advice, a suggestion, or an offer or request to buy or sell any securities. The review uses data and a system from other sources. Investors should do their own separate study and talk with a qualified professional before making any investment choices.
