S&P 500 Component DexCom poised for further price and earnings growth

medical device manufacturer DexCom (NASDAQ:DXCM) has been trading in a fairly tight range recently, holding the earnings from the company’s third-quarter report in late October.



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The stock has risen 16.33% in the last month. Even before the 19% gap that followed the earnings report, DexCom was already beginning to trend higher.

In the last three months, DexCom has advanced 31.41%. However, it is not the best performance within the medical device industry in the last 12 months. A large cap with maximum return is Abiomed (NASDAQ:ABMD).

Smaller medical equipment manufacturers with excellent price-to-share ratios include TransMedics Group (NASDAQ: TMDX)) Y Lantheus (NASDAQ: LNTH). Numerous smaller companies have also posted excellent price performance in the past year, making the entire sub-industry a rising leader within the broader healthcare sector.

Large Cap Peers Medtronic (NYSE:MDT), Stryker (NYSE: SYK), Boston Scientific (NYSE:BSX), Y Edwards Life Sciences (NYSE: EW) they all underperform DexCom.

The S&P 500 component DexCom manufactures glucose monitors for patients with diabetes. That may sound like an established line of business without much need for innovation, but DexCom is busy creating more opportunities.

In the third quarter, the company earned 0.28 per share on revenue of $770 million. Those were gains of 27% and 18% respectively. DexCom outperformed views both at the top and at the bottom.

Expanding your market

In the quarter, DexCom began the international launch of its new sensor, G7. The product was launched in the United Kingdom, Ireland, Germany, Austria, and Hong Kong. It was also listed for healthcare reimbursement in several UK markets, which will likely help expand market share.

The G7 is a wearable device that helps diabetics control blood sugar levels.

DexCom is focusing on making its continuous glucose monitors, known as CGMs, available to a larger group of patients. Medicare and Medicaid rules may change to allow patients who need a daily dose of insulin to get reimbursed for CGMs. If insurance companies follow the government’s lead, and they usually do, that could be a boon to DexCom’s revenue.

In the third-quarter earnings release, DexCom CEO Kevin Sayer also cited strong momentum in the company’s US business.

The company also updated its full-year earnings guidance. The company expects:

  • Revenue in a range of approximately $2.88 to 2.91 billion, which would represent a growth of 18% to 19%
  • Non-GAAP gross profit margin of approximately 64%
  • Non-GAAP operating margin of approximately 16%
  • Adjusted EBITDA margin of approximately 25%

DexCom’s earnings growth has lagged others in its industry. The most recent quarter marked the first time in the last eight that the company posted profit growth. Make no mistake: DexCom has been profitable every year since 2018, but earnings dipped in 2021 to $0.66 per share, down from 2020’s $0.78 per share.

Analysts see earnings growth ahead

For the full year of 2022, Wall Street forecasts earnings per share of $0.80, which would be a 21% increase. Next year, analysts expect net income of $1.11 per share, up 39%.

MarketBeat Analyst Data for DexCom they reveal a “moderate buy” rating on the stock, with a price target of $120.24, just 3.94% below where it is currently trading.

The DexCom chart shows that an attempted rally of a cup with a handle pattern was broken in April. The subsequent consolidation undermined the bottom of the previous structure, sinking to a low of $67.11 in mid-June, when it began to gradually mark the right hand side of the current consolidation.

The stock closed Friday at $115.96, down $3.88 or 3.24%. It ended the session below its 10-day moving average, but the stock is squarely in the buying range now that it has pulled back from its Nov. 1 high of $123.36.

Boston Scientific is part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.

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