Company Profile (excerpt from Reuters): Inogen, Inc., incorporated on November 27, 2001, is a medical technology company. The Company develops, manufactures and markets portable oxygen concentrators used to deliver supplemental long-term oxygen therapy to patients suffering from chronic respiratory conditions. The Company’s Inogen One systems concentrate the air around the patient to offer a single source of supplemental oxygen anytime, anywhere with a portable device. Its three portable product offerings, the Inogen One G4, Inogen One G3 and Inogen One G2, at approximately 2.8, 4.8 and 7.0 pounds with a single battery, respectively. Its Inogen One G4, Inogen One G3 and Inogen One G2 are sub-3, sub-5 and sub-10 pound portable oxygen concentrators, respectively. All of its Inogen One systems are equipped with Intelligent Delivery Technology. The Inogen At Home stationary oxygen concentrator allows it to access the non-ambulatory oxygen patient market and serves as a backup to its Inogen One system for ambulatory patients on its rental service.
Downloadable PDF version of this valuation:
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
|Defensive Investor; must pass 6 out of the following 7 tests.|
|1. Adequate Size of the Enterprise||Market Cap > $2Bil||$4,523,365,268||Pass|
|2. Sufficiently Strong Financial Condition||Current Ratio > 2||6.67||Pass|
|3. Earnings Stability||Positive EPS for 10 years prior||Fail|
|4. Dividend Record||Dividend Payments for 10 years prior||Fail|
|5. Earnings Growth||Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end||12100.00%||Pass|
|6. Moderate PEmg Ratio||PEmg < 20||190.10||Fail|
|7. Moderate Price to Assets||PB Ratio < 2.5 OR PB*PEmg < 50||19.29||Fail|
|Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.|
|1. Sufficiently Strong Financial Condition||Current Ratio > 1.5||6.67||Pass|
|2. Sufficiently Strong Financial Condition||Debt to NCA < 1.1||0.00||Pass|
|3. Earnings Stability||Positive EPS for 5 years prior||Pass|
|4. Dividend Record||Currently Pays Dividend||Fail|
|5. Earnings Growth||EPSmg greater than 5 years ago||Pass|
Stage 2: Determination of Intrinsic Value
|MG Growth Estimate||15.00%|
|MG Value based on 3% Growth||$16.26|
|MG Value based on 0% Growth||$9.53|
|Market Implied Growth Rate||90.80%|
|% of Intrinsic Value||493.75%|
Inogen Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.29 in 2014 to an estimated $1.12 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 90.8% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.
At the time of valuation, further research into Inogen Inc revealed the company was trading above its Graham Number of $20.52. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 190.1, which was above the industry average of 39.79. Finally, the company was trading above its Net Current Asset Value (NCAV) of $8.86.
Inogen Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.
Stage 3: Information for Further Research
|Net Current Asset Value (NCAV)||$8.86|
|Number of Consecutive Years of Dividend Growth||0|
|ModernGraham tagged articles||Morningstar|
|Google Finance||MSN Money|
|Yahoo Finance||Seeking Alpha|
Most Recent Balance Sheet Figures
|Balance Sheet Information||3/1/2018|
|Total Current Assets||$251,054,000|
|Total Current Liabilities||$37,667,000|
|Shares Outstanding (Diluted Average)||22,295,000|
Earnings Per Share History
|Next Fiscal Year Estimate||$1.73|
Earnings Per Share – ModernGraham History
|Next Fiscal Year Estimate||$1.12|
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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours. See my current holdings here. This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions. ModernGraham is not affiliated with the company in any manner. Please be sure to review our detailed disclaimer.