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Does Inspire Medical Systems (INSP) Hava Ample Growth Opportunity, Considering Low Market Share?

Soumya Eswaran
·3-min read

Brown Capital Management, an investment management company, released its “The Brown Capital Management Small Company Fund” first quarter 2024 investor letter. A copy of the letter can be downloaded here. The Small Company Fund returned 0.48%, significantly underperforming the Russell 2000 Growth index’s 7.58% return. Following the release of the inflation report in February, the Small Company Fund experienced underperformance as investors shifted away from high-growth companies, impacting their valuations. In addition, check the fund’s top five holdings to know its best picks in 2024.

The Brown Capital Management Small Company Fund highlighted stocks like Inspire Medical Systems, Inc. (NYSE:INSP), in the first quarter 2024 investor letter. Inspire Medical Systems, Inc. (NYSE:INSP) is a medical technology company, focuses on the development and commercialization of minimally invasive solutions for patients with obstructive sleep apnea. The one-month return of Inspire Medical Systems, Inc. (NYSE:INSP) was 14.34%, and its shares lost 56.24% of their value over the last 52 weeks. On June 24, 2024, Inspire Medical Systems, Inc. (NYSE:INSP) stock closed at $135.30 per share with a market capitalization of $4.02 billion.

The Brown Capital Management Small Company Fund stated the following regarding Inspire Medical Systems, Inc. (NYSE:INSP) in its first quarter 2024 investor letter:

"Inspire Medical Systems, Inc. (NYSE:INSP) provides a minimally invasive solution for patients with moderate to severe Obstructive Sleep Apnea (OSA). Inspire has the first FDA-approved neurostimulation technology in the U.S. that stimulates tongue muscles to create a clear breathing airway while sleeping. Inspire’s device is a small generator connected to a respiratory-sensing lead and a stimulation lead that are implanted in the user during a 90-minute outpatient procedure. OSA is the most common form of sleep apnea which causes closed breathing airways and pauses in breathing during sleep. Left untreated, OSA can cause a lack of energy, headaches and daytime sleepiness and has links to many comorbidities such as cardiovascular disease and Type 2 diabetes. The current standard treatment for OSA patients is Continuous Positive Airway Pressure (CPAP) machine therapy. However, many CPAP patients are non-compliant due to their dislike of wearing CPAP masks and equipment. Inspire’s therapy has become an effective alternative. Inspire is differentiated as its neurostimulation is synchronized with the user’s breathing patterns, rather than providing constant stimulation, reducing tongue fatigue. This OSA solution has the potential to save lives, in addition to time, money and headaches.

We think Inspire should generate 20%-plus annual revenue growth over the next several years. We think the company’s total addressable market is around $21 billion. With the company’s low market penetration, we think there is a long runway for growth."

A medical professional performing a minimally invasive procedure while using the company's technology.

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Inspire Medical Systems, Inc. (NYSE:INSP) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 38 hedge fund portfolios held Inspire Medical Systems, Inc. (NYSE:INSP) at the end of the first quarter which was 46 in the previous quarter. In the first quarter, Inspire Medical Systems, Inc. (NYSE:INSP) generated revenue of $164 million, which represents a 28% increase compared to Q1 2023. While we acknowledge the potential of Inspire Medical Systems, Inc. (NYSE:INSP) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

We discussed Inspire Medical Systems, Inc. (NYSE:INSP) in another article and shared the list of healthcare stocks insiders are dumping. In addition, please check out our hedge fund investor letters Q1 2024 page for more investor letters from hedge funds and other leading investors.

READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.

Disclosure: None. This article is originally published at Insider Monkey.