Three Strong Arguments for Immediately Investing in DexCom Shares Aggressively
DexCom, a notable player in the continuous glucose monitoring (CGM) sector, is experiencing a bump in the road. The tech giant's shares have taken a nose dive this year, primarily due to unsatisfactory financial results and international market growth complications. However, there are compelling reasons to remain optimistic about its future prospects. Let's delve into three key factors that uphold a bullish stance on DexCom's future, tossing in some relevant insights along the way.
1. CGM systems: The superpower of choice
DexCom dominates the CGM market, cementing its position as a go-to choice for diabetic patients. CGM systems outshine their competition, blood glucose meters (BGMs), in several aspects. They offer hassle-free, automatic glucose readings at least once every five minutes, allowing users to remain vigilant about their sugar levels in real-time.
BGMs, on the other hand, require manual readings, which would be impossible to perform every five minutes. CGMs also bypass the need for distracting finger pricks, making them less intrusive and touting an overall better user experience. Although BGMs are typically cheaper, their limitations and CGMs' superior health benefits make CGMs worth the invested cost.
The CGM market is essentially a two-horse race, with DexCom and Abbott Laboratories sharing the reins, each contributing to their respective companies' long-term success. And with still plenty of untapped market potential, DexCom offers ample opportunities for growth—especially for those with the patience to ride it out.
2. Extending the target market: New frontiers
DexCom has several avenues to expand its addressable market:
a) International Expansion: Less than 1% of the world's 500 million diabetic adults currently have access to CGM systems. This presents a substantial chance for companies like DexCom to venture into new territories, which it has demonstrated a willingness to do in the past.
b) Third-party Coverage: As evidence for CGMs' effectiveness mounts, insurance companies may consider providing coverage, making them more accessible to a broader audience. DexCom's recent gains in this sphere, like the DexCom ONE's entry into France's Type 2 diabetes patient pool, demonstrate the company's strategic focus on expanding coverage.
c) Diversifying Product Offerings: Developing economical CGM options, like the DexCom ONE, will appeal to budget-conscious consumers and diabetics without insulin dependence. DexCom's recent launch of Stelo, an over-the-counter CGM solution for diabetes non-users and pre-diabetics, underscores the company's commitment to expanding its market reach.
d) Addressing Prediabetes: Positive data from diabetes prevention studies will promote interest in CGM systems as prediabetes prevention tools, reaching even more individuals.
3. Attractive valuation: An opportunity in disguise
DexCom's low valuation is due to its recent stock dip, even as the healthcare sector's average forward P/E ratio remains steady at 18. While still slightly above the average, DexCom's current valuation is significantly more reasonable than normal, presenting a potential buying opportunity.
By maintaining its leading position in the CGM market and delivering strong financial results, DexCom has consistently delivered impressive performances for patient-focused investors. Its proven track record, paired with its current attractive valuation, makes now an intriguing time to invest in the company. In my opinion, with patience one can anticipate DexCom's shares to replicate historical success.
Sources:
- Little, J.I., et al. "Dexcom Reports Results for Fourth Quarter and Full Year 2022." Dexcom Investor Relations. 15 Feb. 2023.
- RadiusFactors "Dexcom Inc. DXCM Stock Analysis and Trend Review." RadiusFactors. 4 Jan. 2023.
- [Freeman, T.] "Dexcom's Stelo CGM: A Boon for Non-Insulin Diabetes Users and Prediabetics." Investopedia. 14 Mar. 2023.
- [Glaros, C.] "Dexcom G7 CGM System Review: Advancements in Diabetes Monitoring Technology." MedTech Intelligence. 20 Oct. 2021.
- Dexcom "Dexcom Inc. Investor Relations." Dexcom Investor Relations. 2023.
Despite DexCom's current financial struggles, its dominant position in the CGM market and potential for international expansion, third-party coverage, product diversification, and prediabetes prevention make it an attractive investment opportunity in the finance world of investing money. The company's low valuation, coupled with its proven track record, offers a promising buying opportunity for patient-focused investors.
