Inogen, Inc. (INGN): Is this Portable Oxygen Firm Headed to the Stratosphere?"
By: William Pink, AIM Student at
Marquette University
Disclosure: The AIM Equity Fund currently
holds this position. This article was written by myself, and it expresses my
own opinions. I am not receiving compensation for it and I have no business
relationship with any company whose stock is mentioned in this article.
Summary
·
Inogen, Inc. (NASDAQ:INGN) develops and manufactures portable oxygen
concentration units, their Inogen One series, that deliver oxygen therapy to
patients who suffer from respiratory conditions.
·
Recorded
revenue of $40.4 million, which was a 38.9% increase from Q4 of 2014. Sales
revenue made up $28.9 million while rental revenue made up $11.5 million.
·
Reported
net income of $3.9 million, a significant increase of 154% over Q4 2014.
·
Total
units sold in Q4 were 14,500, a 62.9% increase from Q4 2014, displaying strong
consumer demand for Company’s oxygen concentration units.
·
Total
revenue for full year 2015 of $159.0 million, an increase of 41.3% from 2014. The
product sales were $113.6 million and rental revenue was $45.4 million.
·
Net
income for 2015 of $10 million, up 52.5% from 2014 and a 6.3% return on
revenue.
·
The
company posted $0.14 cents per share beating analysts’ estimate of $0.07 cents
per share.
Key Points: Inogen, Inc. recently released an
impressive fourth quarter and full year 2015 numbers. The company needed a
strong fourth quarter after missing earnings in the third quarter causing the
stock price to drop significantly. Management has had some concerns about the
company’s rental revenue and how they will expand upon that number. The fourth
quarter saw a 0% increase in revenue from the third quarter, but this has been
expected since the upcoming additional Medicare rental reimbursement cuts in
2016.
The
direct-to-consumer sales channel of the business was the fastest and largest
source of revenue for the company. Management has placed an increased emphasis
on their business-to-business and direct to consumer sales channels because
they have accepted that their rental channel will not see any significant
increase in the near future. The company has hired additional sales force
personnel to expand upon their sales channel specifically to aid in the strong
demand from their European partners.
After posting
impressive numbers for the fourth quarter, the company has updated their
financial outlook for 2016. Revenue is now expected to range from $187 to $191
million compared to the previous expectations of $177 to $183 million. Net
income is expected to be from $12 to $14 million, a 3.6% to 21% increase from
2015. A modest improvement for a growing company, despite being amidst a
reimbursement cut in one of their primary business channels.
What has the stock done lately?
After fourth
quarter earnings were released Monday March 14, 2016 after markets close, the
stock increased by 17.79%. This was a sign by investors that they were pleased
with the numbers Inogen, Inc. posted and where the company has themselves
positioned heading into 2016.
Past Year Performance
Over the past
year, the stock has reached the stock’s career high of $54.85 in mid September
after beating second quarter expectations. However, the stock dipped back down
to where it started 2015 in the $33-36 range. The stock has seen an increase
over the past month after hitting their year low of $29.48 and after fourth
quarter earnings release the stock climbed back up to $42.00.
Source: Yahoo Finance
My Takeaway
The fourth
quarter posted by Inogen, Inc. was extremely impressive given that their rental
revenue was stable. This was an important quarter for both the company and
investors and management needed to prove that they knew how to build revenue
and expand the business even if revenue from the rental channel was not going
to increase.
Inogen has taken a strategic approach over the past couple
quarters by adding sales personnel to increase their business to business
channel along with their business to consumer channel. The company should
continue to see increase in both channels in 2016 and expand upon their
international exposure through their European partners.
