Over the past six months, DexCom has been a great trade. While the S&P 500 was flat, the stock price has climbed by 8% to $74.17 per share. This run-up might have investors contemplating their next move.
Is now still a good time to buy DXCM? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.
Why Are We Positive On DXCM?
Founded in 1999 and receiving its first FDA approval in 2006, DexCom (NASDAQ: DXCM) develops and sells continuous glucose monitoring systems that allow people with diabetes to track their blood sugar levels without repeated finger pricks.
1. Core Business Firing on All Cylinders
We can better understand Patient Monitoring companies by analyzing their organic revenue. This metric gives visibility into DexCom’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, DexCom’s organic revenue averaged 19.4% year-on-year growth. This performance was fantastic and shows it can expand quickly without relying on expensive (and risky) acquisitions. 
2. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
DexCom’s EPS grew at an astounding 28.9% compounded annual growth rate over the last five years, higher than its 22.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Stellar ROIC Showcases Lucrative Growth Opportunities
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
DexCom’s five-year average ROIC was 26.7%, placing it among the best healthcare companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.
Final Judgment
These are just a few reasons DexCom is a high-quality business worth owning, and with its shares outperforming the market lately, the stock trades at 36.6× forward price-to-earnings (or $74.17 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More Than DexCom
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