DexCom Inc (DXCM, Financial), a leading designer and commercializer of continuous glucose monitoring systems for diabetic patients, has seen a 1.5% gain today, despite a 3-month loss of -30.87%. The company's Earnings Per Share (EPS) stand at 0.86. But the question on investors' minds is: Is the stock significantly undervalued? To answer this, we delve into an in-depth valuation analysis of DexCom (DXCM).
Company Introduction
DexCom, with its innovative continuous glucose monitoring (CGM) systems, serves as a viable alternative to the traditional blood glucose meter process. The company is also evolving its CGM systems to integrate with insulin pumps from Insulet and Tandem. When compared to its GF Value, an estimation of fair value, DexCom's stock price of $87.35 per share seems to be significantly undervalued.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It's calculated based on historical multiples, a GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of the business performance. The GF Value Line on our summary page provides an overview of the fair value that the stock should ideally trade at.
According to this method, DexCom (DXCM, Financial) appears to be significantly undervalued. The GF Value estimates the stock's fair value at $143.99, significantly higher than its current price. This suggests that the long-term return of DexCom's stock is likely to be much higher than its business growth.
Financial Strength
Investing in companies with poor financial strength can lead to a higher risk of permanent loss of capital. DexCom's cash-to-debt ratio of 1.08 is worse than 63.97% of 841 companies in the Medical Devices & Instruments industry. However, the overall financial strength of DexCom is ranked 7 out of 10, indicating fair financial health.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. DexCom has been profitable 4 over the past 10 years. Its operating margin is 14.02%, which ranks better than 73.09% of 836 companies in the Medical Devices & Instruments industry. However, the overall profitability of DexCom is ranked 4 out of 10, indicating poor profitability.
The average annual revenue growth of DexCom is 19.4%, ranking better than 75.38% of 731 companies in the Medical Devices & Instruments industry. The 3-year average EBITDA growth is 31.8%, which ranks better than 77.78% of 738 companies in the same industry.
ROIC vs WACC
Comparing the Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) is another way to determine a company's profitability. DexCom's ROIC for the past 12 months is 14.14, and its WACC is 11.79, implying the company is creating value for shareholders.
Conclusion
In conclusion, DexCom (DXCM, Financial) appears to be significantly undervalued. The company's financial condition is fair, and its profitability is poor. However, its growth ranks better than 77.78% of 738 companies in the Medical Devices & Instruments industry. To learn more about DexCom stock, check out its 30-Year Financials here.
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