Wait For A Dip To Buy DexCom Stock

DexCom (NASDAQ:DXCM) stock experienced a significant 16% surge on Friday following its Q1 earnings release and a share buyback announcement. The company’s first-quarter sales reached $1.04 billion, exceeding the anticipated $1.02 billion. However, its earnings per share (EPS) of $0.32 fell slightly short of the $0.33 consensus estimate. Additionally, while DexCom reaffirmed its full-year sales outlook, it revised its gross margin forecast downward to 62%, a decrease from the previous range of 64-65%. Despite these mixed financial results, the primary catalyst for the stock’s upward movement appears to be the company’s announcement of a $750 million share repurchase program.

Following this recent quarterly performance and the subsequent stock price increase, a key question emerges: is DXCM stock a buy at its current level above $80? We don’t think so. We believe that DXCM appears to be an expensive stock at its present valuation.

This conclusion is based on a comparative assessment of DXCM’s current valuation against its recent operating performance, as well as its current and historical financial standing. Our evaluation of DexCom across crucial dimensions—Growth, Profitability, Financial Stability, and Downturn Resilience—reveals a company with robust operating performance and a strong financial condition, the details of which are provided below.

That said, if you seek upside with lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.

How Does DexCom’s Valuation Look vs. The S&P 500?

Going by what you pay per dollar of sales or profit, DXCM stock looks expensive compared to the broader market.

• DexCom has a price-to-sales (P/S) ratio of 8.0 vs. a figure of 2.8 for the S&P 500
• Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 28.1 compared to 17.6 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 60.9 vs. the benchmark’s 24.5

How Have DexCom’s Revenues Grown Over Recent Years?

DexCom’s Revenues have seen notable growth over recent years.

• DexCom has seen its top line grow at an average rate of 18.2% over the last 3 years (vs. increase of 6.2% for S&P 500)
• Also, its quarterly revenues grew 12% to $1.04 Bil in the most recent quarter from $921 Mil a year ago (vs. 4.9% improvement for S&P 500)

How Profitable Is DexCom?

DexCom’s profit margins are around the median level for companies in the Trefis coverage universe.

• DexCom’s Operating Income over the last four quarters was $633 Mil, which represents a moderate Operating Margin of 15.2% (vs. 13.1% for S&P 500)
• DexCom’s Operating Cash Flow (OCF) over this period was $964 Mil, pointing to a good OCF Margin of 23.2% (vs. 15.7% for S&P 500)
• For the last four-quarter period, DexCom’s Net Income was $535 Mil — indicating a moderate Net Income Margin of 12.9% (vs. 11.3% for S&P 500)

Does DexCom Look Financially Stable?

DexCom’s balance sheet looks very strong.

• DexCom’s Debt figure was $2.6 Bil at the end of the most recent quarter, while its market capitalization is $32 Bil (as of 5/2/2025). This implies a strong Debt-to-Equity Ratio of 9.3% (vs. 21.5% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $2.6 Bil of the $6.5 Bil in Total Assets for DexCom.  This yields a very strong Cash-to-Assets Ratio of 39.8% (vs. 15.0% for S&P 500)

How Resilient Is DXCM Stock During A Downturn?

DXCM stock has seen an impact that was worse than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on DXCM stock? Our dashboard How Low Can DexCom Stock Go In A Market Crash? has a detailed analysis of how the stock performed during and after previous market crashes.

Inflation Shock (2022)

• DXCM stock fell 58.2% from a high of $162.81 on 17 November 2021 to $67.99 on 16 June 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $140.45 on 9 April 2024 and currently trades at around $82

COVID-19 Pandemic (2020)

• DXCM stock fell 36.8% from a high of $75.63 on 20 February 2020 to $47.79 on 18 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 16 April 2020

Global Financial Crisis (2008)

• DXCM stock fell 87.0% from a high of $2.67 on 9 October 2007 to $0.35 on 20 November 2008, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 23 March 2010

Putting All The Pieces Together: What It Means For DXCM Stock

In summary, DexCom’s performance across the parameters detailed above are as follows:

• Growth: Very Strong
• Profitability: Neutral
• Financial Stability: Extremely Strong
• Downturn Resilience: Neutral
• Overall: Strong

In summary, although DexCom demonstrates strong performance across key operational and financial metrics, this strength appears to be already reflected in the company’s high stock valuation. While the announced share buyback is undoubtedly a positive factor for the stock price, DexCom faces underlying fundamental risks. The increasing adoption of GLP-1 drugs is anticipated to lead to a contraction in the overall diabetes market in the coming years, which presents a significant headwind for DexCom. Furthermore, the near-term pressure on the company’s margins adds to these concerns. Consequently, we believe investors would be better positioned by waiting for a potential dip in price before considering an investment in DXCM stock.

The rich valuation of DXCM stock limits its upside potential in the near-to-mid term. As an alternative, the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.

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