In the first quarter of 2020, Insulet's (NASDAQ:PODD) revenue grew by 25% year over year to $200 million. Even as the COVID-19 pandemic ravaged the country, demand for Insulet's Omnipod insulin pump stood at near-record levels.

The company is well on its way to targeting $1 billion in revenue by 2021 and delivering further profits for shareholders. Let's have a look at why the stock is a solid buy. 

Person putting insulin pump in pocket, with other end attached to their stomach

Image source: Getty Images.

A leader in the diabetes treatment sector

Omnipod is the first tubeless insulin pump used to regulate blood sugar levels in patients with diabetes. The medical device can be worn under one's shirt (it's also waterproof) and is subcutaneously administered at the waist. Surveys indicate it improved patients' quality of life by 50.6% to 72.5% when administered. 

Even without insurance, the device costs about $30 per pod, with each pod lasting for three days. Most patients, however, are not paying this price. 

About 50% of Medicare beneficiaries, 70% of Medicaid beneficiaries, and 60% of commercially insured people receive reimbursements for their Omnipod treatment. The device is also simple to use, utilizes a pay-as-you-go structure, and has no upfront cost. About 2,000 new patients were able to receive virtual training for the device in the past quarter due to the effects of COVID-19. By the end of this year, Insulet also expects to launch a version of the device that can monitor insulin dosing for patients electronically.

The device and its growth have contributed significantly to the company's bottom line. Last year, Insulet was able to turn a profit of $0.19 per share after at least four years of consecutive losses. Insulet currently boasts a gross margin of 64.1% and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin of 12.3%, but is still north and south of breaking even. 

A growing market

As previously mentioned, the demand for insulin pumps is multiplying in the U.S. While an estimated 14% of adults in America have diabetes, only 400,000 patients with type 1 diabetes are currently using insulin pumps. However, endocrinologists across the country have estimated the number of users grew by 2.5% last year. 

Based on its $30 pricing, each patient who uses the device continuously every year can bring in about $3,650 in revenue for Insulet, which is quite impressive. For the full fiscal year, Insulet is projecting its total revenue will grow by 15%, making it resilient in the face of COVID-19. 

Another point of growth for Insulet is its pursuit of international expansion. Last year, Omnipod's revenue from Europe, Canada, and the Middle East grew by 47% to $253.1 million, compared to a 30% growth in its U.S. segment. Insulin pumps are more prevalent in other parts of the world and are experiencing stronger upticks in demand. Last year, a study conducted in Germany and Austria found insulin pump use grew from 1% in 1995 to 53% by 2017.

In all, the company's financial health is quite good as well. The company has no long-term interest-bearing debt and has well over $382 million in cash and investments on its balance sheet. While Insulet does have $890 million in convertible debt, such instruments do not mature until 2024, giving it ample opportunity to grow its profits to repay its obligations then.

The company is trading at a considerable premium of 12 times price-to-sales but is counterbalanced by the fact that growth does not come cheap during these dark times. Considering Insulet's product strength and essential nature, its resiliency, and its financial health, healthcare investors who are enthusiastic about growth may wish to add it into their portfolios

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.