It hasn't been a great afternoon session for DexCom investors, who have watched their shares sink by -4.9% to a price of $120.83. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.
Trades Below Its Graham Number but Has an Elevated P/E Ratio:
DexCom, Inc., a medical device company, focuses on the design, development, and commercialization of continuous glucose monitoring (CGM) systems in the United States and internationally. The company belongs to the Health Care sector, which has an average price to earnings (P/E) ratio of 30.21 and an average price to book (P/B) ratio of 4.08. In contrast, DexCom has a trailing 12 month P/E ratio of 132.8 and a P/B ratio of 22.51.
DexCom's PEG ratio is 2.43, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
The Company Has a Positive Net Current Asset Value:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $1,032 | $1,476 | $1,927 | $2,448 | $2,910 | $3,403 |
| Revenue Growth | n/a | 43.08% | 30.54% | 27.08% | 18.84% | 16.95% |
| Gross Margins | 64% | 63% | 66% | 69% | 65% | 64% |
| Operating Margins | -18% | 10% | 16% | 11% | 13% | 15% |
| Net Margins | -12% | 7% | 28% | 9% | 12% | 11% |
| Net Income (MM) | -$127 | $101 | $550 | $217 | $341 | $377 |
| Net Interest Expense (MM) | $23 | $60 | $18 | $19 | $19 | $20 |
| Depreciation & Amort. (MM) | $29 | $49 | $67 | $102 | $156 | $170 |
| Earnings Per Share | -$0.36 | $0.27 | $1.31 | $0.51 | $0.8 | $0.88 |
| EPS Growth | n/a | 175.0% | 385.19% | -61.07% | 56.86% | 10.0% |
| Diluted Shares (MM) | 353 | 369 | 420 | 429 | 428 | 427 |
| Free Cash Flow (MM) | $56 | $134 | $277 | $53 | $305 | $500 |
| Capital Expenditures (MM) | $67 | $180 | $199 | $389 | $365 | $248 |
| Current Ratio | 7.64 | 5.47 | 5.58 | 5.11 | 1.99 | 2.8 |
DexCom benefits from rapidly growing revenues and increasing reinvestment in the business, exceptional EPS growth, and generally positive cash flows. The company's financial statements show an excellent current ratio of 2.8 and wider gross margins than its peer group. Furthermore, DexCom has weak operating margins with a positive growth rate.
