DexCom Stock To $58?

DexCom (DXCM) stock has fallen 15% during the past day, and is currently trading at $58.22. Our multi-factor assessment suggests that it may be time to reduce exposure to DXCM stock. We are primarily concerned current valuation and a price of $58 may not be out of reach. We believe there is not much to fear in DXCM stock given its overall Strong operating performance and financial condition. But given its Very High valuation, the stock appears Relatively Expensive.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $23 Bil in market cap, DexCom provides continuous glucose monitoring (CGM) systems, including the next-generation G7, designed, developed, and commercialized for use in the United States and internationally.

[1] Valuation Looks Very High

This table highlights how DXCM is valued vs broader market. For more details see: DXCM Valuation Ratios

[2] Growth Is Strong

• DexCom has seen its top line grow at an average rate of 17.3% over the last 3 years
• Its revenues have grown 9.3% from $3.9 Bil to $4.3 Bil in the last 12 months
• Also, its quarterly revenues grew 15.2% to $1.2 Bil in the most recent quarter from $1.0 Bil a year ago.

This table highlights how DXCM is growing vs broader market. For more details see: DXCM Revenue Comparison

[3] Profitability Appears Moderate

• DXCM last 12 month operating income was $687 Mil representing operating margin of 16.0%
• With cash flow margin of 23.0%, it generated nearly $988 Mil in operating cash flow over this period
• For the same period, DXCM generated nearly $572 Mil in net income, suggesting net margin of about 13.3%

This table highlights how DXCM profitability vs broader market. For more details see: DXCM Operating Income Comparison

[4] Financial Stability Looks Very Strong

• DXCM Debt was $2.6 Bil at the end of the most recent quarter, while its current Market Cap is $23 Bil. This implies Debt-to-Equity Ratio of 11.3%
• DXCM Cash (including cash equivalents) makes up $2.9 Bil of $7.3 Bil in total Assets. This yields a Cash-to-Assets Ratio of 40.0%

[5] Downturn Resilience Is Moderate

DXCM saw an impact slightly worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• 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 $58.22

 
2020 Covid Pandemic

• 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.
• However, the stock fully recovered to its pre-Crisis peak by 16 April 2020

 
2008 Global Financial Crisis

• 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.
• However, the stock fully recovered to its pre-Crisis peak by 23 March 2010

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read DXCM Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

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