Monday, April 12, 2010
Insulet Corporation (PODD)
Part I – Summary Description:
Insulet Corporation is a medical device company whose operations center on the development, manufacture, and marketing of an insulin infusion system (1) for those with an insulin dependency stemming from diabetes (Yahoo - Finance).
Insulet’s primary product, the OmniPod Insulin Management System, is an insulin infusion system that utilizes a pain-free automated cannula (2) insertion. As a package, the OmniPod System includes an OmniPod disposable insulin infusion device and a handheld wireless personal diabetes manager. The OmniPod System in essence provides customers with a diabetes management solution that allows for a comfortable lifestyle as well as other benefits. OmniPod Systems are sold directly to patients via referrals from healthcare professionals and through patient leads (Yahoo - Finance).
Insulet Corporation is headquartered in Bedford, Massachusetts and was founded in 2000 (Yahoo - Finance).
(1) Insulin infusion system refers to the intensive insulin therapy used by diabetes patients.
(2) A cannula is a tube that is inserted into the body. These tubes are generally used to remove or deliver fluid.
Part II – Summarized Financials:
Yearly/Quarterly Financial Performance (Source: Morningstar)
Competitor Comparison (Source: Yahoo - Finance)
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| Industry = Medical Instruments & Supplies Part III - Reasons to Buy:
- As mentioned above, Insulet manufactures insulin pumps. These insulin pumps are used by diabetes patients as a means of delivering insulin into the body without having to repeatedly prod themselves with injection needles. Thus, insulin pumps allow for much easier insulin therapy treatments (The Motley Fool).
- Of the 3 to 4 million Americans who require insulin, only about 300,000 currently use the more convenient insulin pumps as opposed to needles. Insulet therefore has a vast market of non-pump users to capitalize on (The Motley Fool).
- The amount of diabetes patients that will begin using insulin pumps is expected to grow by 15 to 20 percent per year for the next 5 years. As a manufacturer of insulin pumps, Insulet Corporation will benefit greatly from this trend (The Motley Fool).
- Insulet differs from its competitors in that Insulet’s sole product is infusion pumps (which means that Insulet will expand as the insulin pump market grows), and Insulet’s infusion pump is uniquely wireless and has gained popularity among users as a result (The Motley Fool).
- While revenues are already growing at over 40 percent per year, Insulet additionally intends to combine a continuous glucose monitor with their insulin pump and intends to make some components of the insulin pump smaller. Both alterations will make Insulet’s insulin pump even more appealing to diabetes patients, which should translate into increasing revenues for the company (The Motley Fool).
Part IV - Reasons to Sell:
- Though unlikely to occur in the near future, if Insulet’s competitors, Medtronic or Animas (a wholly owned subsidiary of Johnson and Johnson), were to develop their own wireless, tubeless insulin pumps, Insulet would more than likely see their market share of the insulin pump market decrease significantly. This further means that Insulet would no longer possess a unique and superior insulin pump, and would face stiffer competition as a result. |
Lufkin Industries, Inc. (LUFK)
Composed of the two operational segments, Oil Field and Power Transmission, Lufkin Industries engages in the manufacture and sale of oil field pumping units and power transmission products (Yahoo - Finance).
Lufkin’s Oil Field segment specifically produces and services artificial lift products, including artificial reciprocating rod lift equipment and related products. The Oil Field segment is additionally associated with the design, manufacture, installation, and servicing of computer control equipment and analytical services for artificial lift equipment. An iron foundry is operated by the Oil Field segment and is used to produce castings which are then used for new pumping units. Gas lift (1), plunger lift (2), and completion equipment are also manufactured by the Oil Field segment (Yahoo - Finance).
Lufkin’s Power Transmission segment designs, manufactures, and services speed increasing and reducing gearboxes for industrial applications. The Power Transmission segment additionally manufactures capital spares (3) for customers in association with the manufacture of new gearboxes. Power Transmission parts are also produced for after-market (4) service. Beyond manufacturing, the Power Transmission segment provides both on and off-site repair and service for Lufkin Power Transmission products as well as products manufactured by other companies (Yahoo - Finance).
Lufkin Industries, which was founded in 1902 and is based in Lufkin, Texas, currently has operations in the United States, Europe, Canada, Latin America, the Middle East, and North Africa (Yahoo - Finance).
(1) Gas lift is one of the various processes utilized to artificially lift oil or water from wells in which there is inadequate reservoir pressure to produce the well.
(2) Plunger Lift is one of the various methods of natural gas well deliquification techniques available. These techniques are also known as artificial lift. The plunger is used to remove contaminants from producing natural gas wells. Common possible contaminants are water (liquid, mist, or ice forms), sand, oil or wax.
(3) Capital Spares are specific spare parts intended to have a long operational life or a small chance of failure. Failure of a capital spare part would cause the breakdown of equipment for an extended period because of the prolonged delivery of their replacement.
(4) After-market refers to any market where the customers who employ one product or service are anticipated to purchase a related, follow-on product.
Part II – Summarized Financials:
Yearly/Quarterly Financial Performance (Source: Morningstar)
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Industry = Oil & Gas Equipment & Services
Part III - Reasons to Buy:
- Lufkin’s 2009 fourth quarter earnings were 8 percent higher than that of the previous quarter (bringing 2009 Q4 earnings to $127 million). This earnings growth from 2009 Q3 to Q4 exceeded analyst estimates (Zacks Investment Research).
- This surprisingly successful 2009 fourth quarter earnings growth is additionally coupled with a bullish 2010 earnings growth estimate of 52% (Zacks Investment Research).
- Lufkin’s success is significantly affected by oil prices and the vigor of the economy as a whole. As a result, Lufkin will particularly benefit from a recovering global economy in which energy demand rises, and oil exploration and production consequently also increases (Zacks Investment Research).
- Even now, Lufkin’s shares are on an upward trend as a result of higher energy prices and the continuing growth in land-based drilling (Zacks Investment Research).
- Lufkin has recently engaged in a mutually beneficial licensing agreement with Global Energy regarding the development, marketing, and servicing of Hydraulic Submersible Pump technology in various markets worldwide (except for Canada) (New Technology Magazine).
Part IV - Reasons to Sell:
- Be wary of a financial performance which does not exceed or at least match bullish estimates.
- Remember, Lufkin produces equipment and machinery to be used by energy companies. Lufkin does not engage in the actual exploration, production or sale of oil or natural gas. As such, declining energy prices and a consequent reduction in oil production will assuredly have adverse effects on Lufkin’s performance.