Insulet CorporationPODDNASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Sell

Fair Value: $169.78 per share(market-calibrated)

-30.8%

Upside to Fair Value

Current

$245.45

Pure Model

$162.38

Fair Value

$169.78

Bull Case

$234.32

Bear Case

$106.74

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

8.10%

Calibrated Growth

4.27%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $162.38.

What's Driving This Ratingfor PODD

↓

CapEx normalizing toward maintenance

Historical CapEx is 4.96% of revenue (heavy investment phase). Model fades this to 3.50% by Year 10, freeing up ~$122M in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 11.96% — below the sector mature average of 20.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $1.4B (17.37% margin).

↑

Strong near-term revenue growth

Analyst consensus projects 22.26% revenue growth in Year 1, fading to 11.33% by Year 5 and 3.00% by Year 10. Revenue reaches $8.3B by Year 10 (vs $2.7B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $90.37/share (13.8x terminal FCF) while exit multiple gives $234.39/share (43.5x terminal FCF). The 24x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.00% growth is more conservative. The base case averages both methods.

🎯

Market pricing in higher long-term growth

To justify $245.45, the market implies 8.10% perpetual growth — 510bps above the model's 3.00%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

→

Moderate cash flow conversion

Year 10 FCF/EBITDA conversion is 55.19% — acceptable but leaves room for improvement. High reinvestment needs consume a meaningful portion of operating cash flow.

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.42

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)10.88%

Cost of Debt

Pre-tax Cost of Debt4.88%

Tax Rate27.22%

After-tax Cost of Debt3.55%

Equity Weight (E/V)94.26%

Debt Weight (D/V)5.74%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (94.26% × 10.88%) + (5.74% × 3.55%)

= 10.46%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$3.3B	$4.7B	$6.1B	$7.3B	$8.3B
EBIT	$396M	$560M	$735M	$1.1B	$1.4B
Tax	$108M	$153M	$200M	$294M	$394M
NOPAT	$288M	$408M	$535M	$787M	$1.1B
+ Depreciation	$89M	$126M	$165M	$196M	$225M
- Capex	$164M	$217M	$265M	$290M	$292M
- Δ NWC	$158M	$191M	$163M	$141M	$64M
Free Cash Flow	$55M	$126M	$272M	$551M	$923M
Discount Factor	0.905	0.742	0.608	0.498	0.370
Present Value	$50M	$93M	$165M	$275M	$341M

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$923M

Terminal Growth Rate3.00%

WACC10.46%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$12.7B

PV of Terminal Value$4.7B

Exit Multiple Method

Year 10 EBITDA$1.7B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$40.1B

PV of Terminal Value$14.8B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$2.0B

PV of Terminal Value$4.7B

Enterprise Value$6.7B

(-) Net Debt$335M

Equity Value$6.4B

Shares Outstanding70M

Price per Share$90.37

Exit Multiple Method

PV of Projected FCFs$2.0B

PV of Terminal Value$14.8B

Enterprise Value$16.8B

(-) Net Debt$335M

Equity Value$16.5B

Shares Outstanding70M

Price per Share$234.39

Pure Model Fair Value

$162.38

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
8.46%	$199.91	$204.01	$208.86	$214.69	$221.83
9.46%	$177.12	$179.92	$183.16	$186.93	$191.40
10.46%	$158.13	$160.12	$162.38	$164.96	$167.94
11.46%	$141.98	$143.43	$145.06	$146.90	$148.98
12.46%	$128.02	$129.11	$130.32	$131.67	$133.17

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$106.74

-56.5% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.77

Base Case

$162.38

-33.8% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 1.42

Bull Case

$234.32

-4.5% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 1.21

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Healthcare Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth22.26%

Year 3 Revenue Growth18.46%

Year 5 Revenue Growth11.33%

Year 7 Revenue Growth8.00%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin11.96%

Terminal EBIT Margin20.00%

Tax Rate27.22%

Historical Capex / Rev4.96%

Terminal Capex / Rev3.50%

NWC / Revenue26.15%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 24x EV/EBITDA (Healthcare sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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