Artemis Investment Limited - DexCom Inc. stockholders have received both good and bad news

So far this year, DexCom Inc. (DXCM) stockholders have received both good and bad news. The good news is that the stock has recently increased by approximately 30%.
ADMIRALTY, Hong Kong - March 1, 2023 - PRLog -- What about the negative news? DXCM's stock remains down more than 20% year to date. Some investors feel DXCM's progress can be sustained. Others believe that the manufacturer of continuous glucose monitoring (CGM) equipment is a considerably riskier bet. Here are the positive and negative scenarios for DXCM shares.


Keith Speight's argument: I believe the bull case for DexCom is straightforward: the firm is growing rapidly and has plenty of potential to expand. The first half of the thesis is easily substantiated, with DexCom on target to grow sales by about 19% by 2022. In terms of the second component, there are various reasons to be hopeful about the company's future growth.

The number of persons with diabetes is rising worldwide, and it is expected to increase by more than 45% by 2045. Intermittent glucose monitoring is insufficient for many of these people. CGM devices from DexCom give a much-needed answer.

Monitoring people with non-intensive type 2 diabetes presents a particularly large potential. DexCom predicts that the US market for patients requiring intense insulin therapy is seven times higher than its current total addressable market.

Diabetes is a worldwide issue, not only in the United States. DexCom intends to more than treble its total addressable market by late 2023 through worldwide growth.

The most significant disadvantage of the healthcare stock is its value. But, with its tremendous growth potential, I believe DexCom's bull argument is strong.


George Budwell's argument: DexCom's core business is currently running on all cylinders. Let's be honest about it. The business expects to record annual top-line growth of more than 18% in 2022, and its CGM devices have a massive non-GAAP gross profit margin of roughly 64%. The continuing release of DexCom's latest-generation G7 CGM system is also predicted to boost sales by 20% next year.

What's the snag? DexCom's stock may be very overpriced right now. DexCom's stock is currently selling at about 11.5 times next year's estimated revenues, thanks to its blazing revenue growth over the last several years. While most publicly traded medical device firms command high premiums, DexCom's value may have gone a little out of hand. In comparison, the average forward-looking price-to-sales ratio in the company's immediate peer group is now about 5.5. As a result, DexCom's stock is valued at more than double the industry average on this criteria.

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Cherry Hwuang
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Page Updated Last on: Mar 02, 2023

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