Inogen, Inc.: Initiation of Research Coverage

Tuesday, March 11, 2014

William Blair & Company initiated research coverage of Inogen, Inc. (INGN $19.19) with an Outperform rating and Aggressive Growth company profile. Inogen is the market leader in the portable oxygen concentrator segment of the $3 billion domestic home oxygen therapy market.

Analysts Ben Andrew and Margaret Kaczor estimated the company would generate earnings per share of $0.33 in 2014 and $0.42 in 2015, on revenue of $91.4 million in 2014 and $108.6 million in 2015.

“Inogen offers a disruptive model in home oxygen therapy delivery,” Andrew said. “The company’s products provide an unlimited supply of oxygen in a small, lightweight form factor, which it sells directly to patients. With its ability to bypass the traditional durable medical equipment providers, Inogen is able to deliver above-average margins in the industry. Specifically, even after the implementation of competitive bidding, the company’s gross margins are 10% higher than those of traditional oxygen manufacturers, giving Inogen a differentiated competitive advantage. And Inogen is poised to introduce two new products over the next year: its own stationary concentrator and an even smaller, lighter POC that retains its characteristic high flow rate. We believe Inogen’s long history of innovation and proven intellectual property position it to retain or take market share.”

Kaczor added, “With a robust new product portfolio slated for introduction over the next several quarters, as well as a significantly increased sales organization and growing field presence with physicians to detail its products, we believe Inogen is well positioned to deliver 20%-plus top-line growth this year and next. The potential market opportunity for POCs is sizable, so we view Inogen’s valuation of 2.6 times our 2015 revenue target as a reasonable entry point for investors. As investors become more comfortable with Inogen’s business model, we believe that the revenue multiple will move more in line with the company’s peer group.”

William Blair & Company is a global investment banking and asset management firm. We are committed to building enduring relationships with our clients and providing expertise and solutions to meet their evolving needs. An independent and employee-owned firm, William Blair is based in Chicago, with office locations in 12 cities including London, New York, Shanghai, and Zurich. For more information, please visit williamblair.com.

View coverage list


William Blair & Company, L.L.C. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making an investment decision.

William Blair & Company, L.L.C. was a manager or co-manager of a public offering of equity securities within the prior 12 months.

William Blair & Company, L.L.C. is a market maker in the security of this company and may have a long or short position.

William Blair intends to seek investment banking compensation in the next three months from the subject company covered in this report.

Within the past 12 months William Blair has provided or is providing investment banking services to or has an investment services relationship with the subject company covered in this report.

Additional information is available upon request.

Current Ratings Distribution (as of 02/28/14)

Coverage Universe
Outperform (Buy): 64%
Market Perform (Hold): 33%
Underperform (Sell): 1%

Inv. Banking Relationships*
Outperform (Buy): 13%
Market Perform (Hold): 2%
Underperform (Sell): 0%

* Percentage of companies in each rating category that are investment banking clients, defined as companies for which William Blair has received compensation for investment banking services within the past 12 months.

Stock ratings, price targets, and valuation methodologies: William Blair & Company, L.L.C. uses a three-point system to rate stocks. Individual ratings and price targets (where used) reflect the expected performance of the stock relative to the broader market (generally the S&P 500, unless otherwise indicated) over the next 12 months. The assessment of expected performance is a function of near-, intermediate-, and long-term company fundamentals, industry outlook, confidence in earnings estimates, valuation (and our valuation methodology), and other factors. Outperform (O) – stock expected to outperform the broader market over the next 12 months; Market Perform (M) – stock expected to perform approximately in line with the broader market over the next 12 months; Underperform (U) – stock expected to underperform the broader market over the next 12 months; not rated (NR) – the stock is not currently rated. The valuation methodologies used to determine price targets (where used) include (but are not limited to) price-to-earnings multiple (P/E), relative P/E (compared with the relevant market), P/E-to-growth-rate (PEG) ratio, market capitalization/revenue multiple, enterprise value/EBITDA ratio, discounted cash flow, and others.

Company Profile: The William Blair research philosophy is focused on quality growth companies. Growth companies by their nature tend to be more volatile than the overall stock market. Company profile is a fundamental assessment, over a longer-term horizon, of the business risk of the company relative to the broader William Blair universe. Factors assessed include: 1) durability and strength of franchise (management strength and track record, market leadership, distinctive capabilities); 2) financial profile (earnings growth rate/consistency, cash flow generation, return on investment, balance sheet, accounting); 3) other factors such as sector or industry conditions, economic environment, confidence in long-term growth prospects, etc. Established Growth (E) – Fundamental risk is lower relative to the broader William Blair universe; Core Growth (C) – Fundamental risk is approximately in line with the broader William Blair universe; Aggressive Growth (A) – Fundamental risk is higher relative to the broader William Blair universe.

The ratings, price targets (where used), valuation methodologies, and company profile assessments reflect the opinion of the individual analyst and are subject to change at any time.

The compensation of the research analyst is based on a variety of factors, including performance of his or her stock recommendations; contributions to all of the firm's departments, including asset management, corporate finance, institutional sales, and retail brokerage; firm profitability; and competitive factors.

Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies—to our clients and our trading desks—that are contrary to opinions expressed in this research. Our asset management and trading desks may make investment decisions that are inconsistent with recommendations or views expressed in this report. We will from time to time have long or short positions in, act as principal in, and buy or sell the securities referred to in this report. Our research is disseminated primarily electronically, and in some instances in printed form. Electronic research is simultaneously available to all clients. This research is for our clients only. No part of this material may be copied or duplicated in any form by any means or redistributed without the prior written consent of William Blair & Company, L.L.C.

THIS IS NOT IN ANY SENSE A SOLICITATION OR OFFER OF THE PURCHASE OR SALE OF SECURITIES. THE FACTUAL STATEMENTS HEREIN HAVE BEEN TAKEN FROM SOURCES WE BELIEVE TO BE RELIABLE, BUT SUCH STATEMENTS ARE MADE WITHOUT ANY REPRESENTATION AS TO ACCURACY OR COMPLETENESS OR OTHERWISE. OPINIONS EXPRESSED ARE OUR OWN UNLESS OTHERWISE STATED. PRICES SHOWN ARE APPROXIMATE.

THIS MATERIAL HAS BEEN APPROVED FOR DISTRIBUTION IN THE UNITED KINGDOM BY WILLIAM BLAIR INTERNATIONAL, LIMITED, REGULATED BY THE FINANCIAL CONDUCT AUTHORITY (FCA), AND IS DIRECTED ONLY AT, AND IS ONLY MADE AVAILABLE TO, PERSONS FALLING WITHIN COB 3.5 AND 3.6 OF THE FCA HANDBOOK (BEING “ELIGIBLE COUNTERPARTIES” AND “PROFESSIONAL CLIENTS”). THIS DOCUMENT IS NOT TO BE DISTRIBUTED OR PASSED ON TO ANY “RETAIL CLIENTS.” NO PERSONS OTHER THAN PERSONS TO WHOM THIS DOCUMENT IS DIRECTED SHOULD RELY ON IT OR ITS CONTENTS OR USE IT AS THE BASIS TO MAKE AN INVESTMENT DECISION.

"WILLIAM BLAIR & COMPANY" AND "WILLIAM BLAIR & COMPANY (SCRIPT)" ARE REGISTERED TRADEMARKS OF WILLIAM BLAIR & COMPANY, L.L.C. Copyright 2014, William Blair & Company, L.L.C.

News Alerts

Stay connected to your favorite publications and news features.

Subscribe Now