Option FanaticOptions, stock, futures, and system trading, backtesting, money management, and much more!

DXCM Stock Study (11-7-25)

Posted by on March 4, 2025 at 07:10 | Last modified: November 7, 2025 08:24

I recently did a stock study on Dexcom, Inc. (DXCM, $58.02).

M* writes:

     > DexCom designs and commercializes continuous glucose
     > monitoring systems for diabetic patients. CGM systems
     > serve as an alternative to the traditional blood glucose
     > meter process, and the company is evolving its CGM
     > systems to provide integration with insulin pumps from
     > Insulet and Tandem for automatic insulin delivery.

Since turning profitable in 2019, the medium-size company has grown sales and earnings at annualized rates of 22.5% and 29.5%, respectively. Lines are mostly up, straight, and parallel except for an EPS spike and subsequent decline in ’20-’21. Five- (Six-) year EPS R^2 is 0.18 (0.48) and Value Line (VL) gives an Earnings Predictability score of 45.

Since 2019, PTPM is about even with peer and industry averages while increasing from 7.1% to 17.6% (’24) with a last-5-year mean of 13.9%. ROE is about even with peer and industry averages while increasing from 13.2% to 28.0% (’24) with a last-5-year mean of 21.4%. Debt-to-Capital is greater than peer and industry averages while ranging from 45.5% in ’21 to 56.8% in ’20 with a last-5-year mean of 51.3%.

Quick Ratio is 1.4 and Interest Coverage is 52 per M* who assigns “Narrow” Economic Moat, gives “Exemplary” rating for Capital Allocation, and a B grade for Financial Health (per BI website). VL gives a B+ grade for Financial Strength.

With regard to sales growth:

My 12.0% per year forecast is below the range.

With regard to EPS growth:

My 15.0% per year forecast is below the long-term estimate range [mean of seven: 22.8%]. Initial value is ’24 EPS of $1.42/share rather than 2025 Q3 $1.80 (annualized).

My Forecast High P/E is 45.0. Since 2019, high P/E ranges from 90.2 in ’20 to 425 in ’21 with four data points in triple digits. I am above the current P/E of 32.9 but way below the high P/E range.

My Forecast Low P/E is 29.0. Since 2019, low P/E ranges from 36.0 in ’20 to 205 in ’21 with a last-5-year mean (excluding ’21) of 54.7. I am forecasting below the range.

My Low Stock Price Forecast (LSPF) of $41.20 is default based on initial value given above. That is 29.0% less than the previous closing price and 27.1% less than the 52-week low.

These inputs land DXCM in the BUY zone with a U/D ratio of 3.8. Total Annualized Return (TAR) is 16.8%.

PAR (using Forecast Average—not High—P/E) of 12.3% is decent for a medium-size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 22 studies done in the past 90 days (my study along with 5 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E, are 14.9%, 19.4%, 51.8, and 35.0. I am lower across the board. VL projects future average annual P/E of 35.0 that is less than MS (43.4) and less than mine (37.0).

MS high / low EPS are $3.54 / $1.44 versus my $2.86 / $1.42 (per share). My high EPS is less due to a lower growth rate. VL’s $3.55 is greater than both.

MS LSPF of $52.60 implies a Forecast Low P/E of 36.5 versus the above-stated 35.0. MS LSPF is 4.4% greater than the default $1.44/share * 35.0 = $50.40 resulting in more aggressive zoning. MS LSPF is also 27.7% greater than mine.

MOS is robust in this study because my inputs are near or below historical/analyst averages/ranges. Although a small MS sample size only allows for anecdotal comparison, MS TAR (21.1%) exceeding mine by 4.3% per year and my lower LSPF are evidence for MOS.

With regard to valuation, PEG is 1.3 and 1.9 per Zacks/M* and my projected P/E: fairly valued. Relative Value is extremely cheap [(current P/E) / 5-year-mean average P/E] with history of sky-high P/Es, but I don’t find that credible as multiple contraction will occur sooner or later.

Reading reports makes it clear the company has its challenges from a qualitative standpoint. I let the analysts mind these details with the estimates they provide.

Nevertheless, discovering a BUY with MOS strong against a sufficient number of analysts [all with the opportunity to estimate accordingly] leaves me walking away with confidence.

Per U/D, DXCM is a BUY under $63/share. BI TAR criterion is currently met: [128.7 / ((14.87 / 100 ) +1 ) ^ 5] ~ $64 with a forecast high price ~$129 (no dividend).

A 90-day free trial to BetterInvesting® may be secured here (also see link under “Pages” section at top right of this page).

Categories: BetterInvesting® | Comments (0) | Permalink