Tuesday, April 2, 2019

A Current AIM Small Cap Equity Holding: Inogen Inc. (INGN, $90.12): “Trying to Catch its Breath” By: Erik Olson, AIM Student at Marquette University

Inogen Inc. (INGN, $90.12): “Trying to Catch its Breath”
By: Erik Olson, 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.


Inogen Inc. (NASDAQ:INGN) develops, manufactures, and markets portable oxygen concentrators designed to deliver supplemental oxygen therapy to individuals with chronic respiratory conditions.

• The Inogen One G5 is expected to be released in the first half of 2019.

• Q4 sales were adversely affected by a slowing purchasing pattern of a large national provider.

• A legal investigation was launched by a law firm on behalf of shareholders due to possible federal securities laws violations.

• The POC market is still underpenetrated leaving room for Inogen to grow.

Key points: 

Inogen is expected to release the Inogen One G5, a light weight portable oxygen concentrator. While the exact weight has yet to be determined, it is expected to have an O2 capacity of 1,260 ml/min. Additionally, the machine is expected to have a battery duration longer than the Inogen One G3 which could run for up to 10 hours on a double battery.

Q4 sales were adversely affected by a slowing purchasing pattern of a large national provider. The company has stated that this was due to a transitory period of infrastructure restructuring and not any long-term economic or competitive dynamic. Although, it is unlikely the customer will increase purchases in the near term.

The Law Offices of Howard G. Smith announced an investigation concerning the company and its officers’ possible violations of federal securities laws. This investigation was launched on behalf of Inogen’s shareholders. This investigation is in regard to an earnings call held back in February.

The portable oxygen concentrator market remains underpenetrated. Based on Medicare claims data from 2017, the penetration rate was approximately 11% but it is estimated that full penetration is around 65%. This leaves room for large gains in market share for Inogen. It is estimated that the market will reach full POC penetration in 5+ years.

What has the stock done lately?

Inogen’s stock price took a big dip in February after management backtracked on their total addressable market numbers. A revision of 2019 guidance was also issued and shares fell more than 24%. Inogen continues to tumble as the stock is currently trading at $90.12, down from $123.22 at the start of the year.

Past Year Performance:

Inogen’s stock price is down almost 40% from a year ago. However, it gained significantly throughout the past year before further tumbling. It hit a 52-week high in September and is currently trading near its 52-week low, almost 70% lower than its peak.

1-Year vs. Russell 2000
Source: Bloomberg

My Takeaway:

I believe with the huge tumble in price over the past year, Inogen is currently trading at a discount to its intrinsic value. The company will continue to stay competitive by further investing in innovative product offerings. Additionally, the large opportunity for growth in the industry will allow the company to continue to grow. Large fixed and variable costs associated with oxygen tank delivery further adds to the attractiveness of Inogen’s product offerings. The continued expansion into the underpenetrated POC market will also add to Inogen’s value.

1-Month Chart
Source: Bloomberg