DexCom stock (NASDAQ
This 89% rise for DexCom stock since late 2019 can primarily be attributed to 1. DexCom’s revenue growth of 117% to $3.2 billion over the last twelve months, compared to $1.5 billion in 2019, partly offset by 2. the company’s P/S ratio falling 9% to 12.5x revenues vs. 13.7x in 2019, and 3. a 5% rise in its total shares outstanding to 388 million. This has meant that the company’s revenue per share metric has risen 107% to $8.24 now, compared to $3.98 in 2019. Our dashboard on Why DexCom Stock Moved has more details.
New customer additions are leading the revenue growth for DexCom amid rising awareness of CGM devices. DexCom is among the few players with regulatory approvals for its wearable continuous glucose monitoring device. There is a high demand for CGM devices that do not require a finger prick, and data can be self-monitored easily. Given the limited competition and a vast pool of diabetic patients (over 37 million in the U.S. alone), the company will likely see strong revenue growth over the coming years. DexCom’s future sales growth will likely be bolstered by its G7 CGM system in the U.S., which secured regulatory approval in December 2022. The company expects its revenue to rise 21% to $3.5 billion in 2023 and $4.9 billion in 2025 (at the mid-point of the provided range). Not only has the company seen stellar revenue growth, but it also saw its margin expand from 9.4% in 2019 to 14.0% now. Our DexCom Operating Income Comparison dashboard has more details.
After its recent fall, DXCM stock looks attractive. It currently trades at 12x revenues compared to its last five-year average of 21x, implying that the stock is undervalued. Our DexCom Valuation Ratios Comparison dashboard has more details. The company continues to see strong sales growth and also expand its operating margin. The concerns over the broader application of obesity drugs and its impact on DexCom also appear to be stretched. A CGM device will be a helpful tool to monitor the effectiveness of the drugs on a patient. A massive 40% cut in P/S multiple for DexCom isn’t justified in our view. Overall, investors can use the current dip in DXCM stock for likely solid gains in the long run.
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