Insulet (NASDAQ:PODD) is among a handful of companies that is revolutionizing the massive and growing diabetes market with new devices that make treatment simpler. Its tubeless insulin pump is driving double-digit top-line growth and putting the company on a path toward profitability, yet its share price has slipped over 20% in recent weeks. Is now a good time to buy this stock?

In this segment from The Motley Fool's Industry Focus: Healthcare podcast, host Shannon Jones and Fool.com contributor Todd Campbell explain how a growing addressable market could be a boon for Insulet.

A full transcript follows the video.

This video was recorded on Nov. 28, 2018.

Shannon Jones: Let's dive into your first one. This is a stock that one of our fellow colleagues, Brian Feroldi, has talked quite a bit about. Tell us about your first top healthcare pick.

Todd Campbell: We've talked in the past on the show a lot about diabetes and what a major market opportunity that is for investors. One of the companies that I want to highlight today is Insulet, ticker PODD. They make a small, saucer-shaped insulin pump that diabetics can wear for up to three days. It's the only tubeless pump that's on the market. They were trading at about $106 at the peak in October. They're down about 24% from that, trading around $81 today.

Jones: It certainly sounds like Insulet shares could go lower. One of the things in researching for this episode, I'm impressed with the fact that, obviously the diabetes market is huge, but they've got a drug delivery system that could even expand beyond diabetes.

Campbell: It's really interesting to watch and see how companies are starting to try and reach out and revolutionize diabetes treatment with these different devices that basically allow patients to have a much easier time in figuring out when they need to take their insulin, and then automating the delivery of that insulin so that patients no longer have to go through this process of multiple finger sticks a day to see if they need to have those insulin injections, and then, of course, taking those actual injections afterwards. There are 30 million people in the U.S. with diabetes, including 1.5 million people roughly with Type 1 diabetes, which is the form of diabetes in which those patients don't produce any insulin. Those patients have a very high burden, as far as having to do these finger sticks and take these multiple injections every day.

Companies like Insulet have come out and developed different devices that can be used in combination with one another to try and make that whole process simpler, easier and more effective. Studies have shown that the typical diabetic is going to spend about 70% of their day outside of their targeted blood sugar range. That is bad news because it can contribute to the disease progressing more quickly, causing kidney damage, nerve damage, cardiovascular damage.

Insulet has this Omnipod, which is this insulin delivery device that can be worn. It's the only tubeless one that's on the market. It's positioned to benefit from the fact that we've got this huge and growing population of diabetes patients. The Institute for Alternative Futures estimates that we could go from 30 million Americans to 55 million Americans with diabetes by 2030. There's a huge demographic tailwind supporting demand for this company.

Jones: Speaking about the convenience and advantages of pumps themselves, it certainly makes sense when you can automate this insulin delivery. But this certainly doesn't mean that Insulet is in a field all by itself. It's definitely got some competition. Is that right?

Campbell: Yeah, and one of those competitors is very deep-pocketed, it's Medtronic, ticker MDT. They have a big diabetes business. Not only do they produce insulin pumps that compete against the Omnipod, they also produce continuous glucose monitors that are used to evaluate your blood sugar in real time. They were the first to launch an automated insulin delivery system that marries their continuous glucose monitor and their pump together. Since then, another competitor, Tandem Diabetes, rolled out their own automated system in combination with a continuous glucose monitor made by Dexcom earlier this year. I think IT was August that they began selling that.

So there is stiff competition, and Insulet does not have an automated system on the market yet. Investors should realize they could face some headwinds to their growth rate as people decide whether or not they want to have these automated systems rather than the convenience of the tubeless pump itself.

That being said, though, don't count Insulet out. They're working on their own automated system. It should be in the market by 2020. And the way that they're designing their system is not only to use Dexcom's CGM, but to be able to use a smartphone app to control it. It's something that a lot of patients would like to see. A really big jump up in convenience.

And even with all this competition from Medtronic and Tandem, this is still a company that's growing double-digits.

Jones: Yeah, I was just looking here. 2017 sales grew 26% of $460 million. Just in Q3, sales grew 24% year over year to $151 million for the full year. Guiding for $558-563 million in sales. That's up about 20% from last year. It sounds like they're pretty close to turning a corner on profitability, as well. Is that right?

Campbell: Absolutely. They were on track to deliver their first operating profit since their inception this year. They've done a great job of controlling their expenses, boosting their gross margin. Yes, in the short-term, they're going to still face some competitive headwinds from Medtronic and Tandem. But the fact that they're still growing so quickly even in the face of those stiff competitors, and the fact that they have their own automated system coming in a year, I think that this is an attractive stock to add to long-term portfolios. It could be bumpy for a little while. But I think long-term portfolios, adding this one would make sense.

Jones: Absolutely. To that point, watching the partnership opportunities that'll come about. Right now, Insulet is partnered with Amgen on the delivery system for Neulasta. You could certainly see many different applications across the entire healthcare space where a customized version of the Omnipod can be used to deliver different types of medication to different patients. Of the ones we've looked at, this one has actually probably caught my attention the most, Todd.

Campbell: I think it's a very intriguing play. Part of the reason that I think it's such an intriguing play is because of the fact that it has the potential to be a major disruptive force in the treatment of what is a huge, multiple hundreds of billions of dollars a year in spending market.

I also like Dexcom, which we talked about as being the continuous glucose monitors. They're an agnostic play because you could use a Tandem pump, you can use an insulin pump, whatever. But I think Insulet offers a particularly interesting value right now because of that 20% drop.

Shannon Jones has no position in any of the stocks mentioned. Todd Campbell owns shares of AMGN. His clients may have positions in the companies mentioned. The Motley Fool owns shares of MDT. The Motley Fool recommends AMGN and Insulet. The Motley Fool has a disclosure policy.