DexCom (NASDAQ: DXCM) has seen its share price rise by more than 10% on the back of impressive revenue and earnings growth in its third quarter update.
The business emphasises using innovative technology to construct continuous glucose monitoring (CGM) systems that help people with diabetes manage their condition in the simplest way possible.
But is DXCM stock a good investment?
What is DexCom?
DexCom is a medical device company which focuses on the design, development and commercialization of continuous glucose monitoring (CGM) systems in the United States and internationally.
The company provides its systems for use by people with diabetes, as well as for use by healthcare providers. Its products include DexCom G7, an integrated CGM system for diabetes management.
DexCom has a collaboration and license agreement with Verily Life Sciences LLC and Verily Ireland Limited to develop blood-based or interstitial glucose monitoring products. The company markets its products directly to endocrinologists, physicians, and diabetes educators.
DexCom was incorporated in 1999 and is headquartered in San Diego, California.
DXCM Stock Financials
The company’s most recent quarter, which covered the three-month period ended 30 September, saw the business report revenue of $769.6m, compared with $650.2m in the same period 12 months prior.
This increase resulted in net income rising from $87.3m to $101.2m, with the impact of higher revenues somewhat mitigated by rising cost of sales and operating expenses.
The year to date has seen DXCM stock decline by 13.35%, while the last 12 months has seen it drop by 20.87%. The period has seen DXCM hit a high of $164.86 and a low of $66.89.
The business has a price to sales ratio of 15.41 and a price to book value of 17.72, compared with industry averages of 14.39 and 7.37, according to CSIMarket. As such, the stock appears to be slightly overvalued.
The company does not pay a dividend to its shareholders.
DXCM Growth Potential
The company notes that the insulin-using population in the US alone amounts to 7 million people, with 4 million of these using intensive insulin therapy. Furthermore, both figures are on an upward trajectory.
The company’s main objective to ensure long-term growth is achieving pharmacy access in the US, which it says makes its products easier to prescribe and more accessible to patients.
Additionally, the company is making international expansion a priority, with the business already expanding its market share overseas. US sales makes up 75% of the company’s revenues, though the contribution from international markets is increasing at a faster rate to American sales.
For example, the business’ most recent quarter saw the international roll-out of Dexcom G7 with launches in the United Kingdom, Ireland, Germany, Austria, and Hong Kong.
The company’s DexCom ONE product, which comprises a small wearable product that relays information to a mobile app, was initially launched internationally in Estonia, Lithuania, Bulgaria and Latvia, with expansion since having sent the product into the Spanish, Italian and UK markets.
While customers must pay out of pocket for these products sometimes, the product has been included in NHS drug tariffs in the UK, meaning expanded reimbursement access and potential for the product to be used by a wider portion of patients.
Is DXCM Stock a Good Investment?
DexCom is a business that appears laser focused on improving the quality of life of people with diabetes and it’s clear that the company has delivered some very popular solutions. The popularity of these products is easy to understand in a world where so many people are already using smartphone apps to monitor sleep, exercise, diet and so much more.
It’s not just the nature of DexCom’s product that is appealing either, with the company’s financials also pointing to strong growth and a steady expansion into new markets. Steadily increasing prevalence of diabetes will also increase the size of the business’ addressable market.
Some financial metrics might indicate that the stock is currently overpriced based on its current numbers, but that indicates optimism over the company’s future potential. While there are obviously some risks, DexCom looks like a stock to consider for investors eyeing long-term growth.
The 20 analysts covering the stock for the Wall Street Journal have a consensus Overweight rating for DXCM. DXCM stock stands at $114.36 at the time of writing.
