Is DexCom a Winning Diabetes Stock to Buy?
July 14, 2021 5 min read  This story originally appeared on StockNews    Continuous glucose monitoring (CGM) device maker DexCom (DXCM) has made key advancements in diabetes management technology to tap growing diabetes market opportunities. However, despite having a first-mover advantage in the fast-growing CGM market, the company faces increasing competition from other key players. Lets find out. San Diego, Calif.-based medical device company DexCom, Inc. (DXCM) develops and distributes continuous glucose monitoring (CGM) systems for diabetes management in the United States and internationally. DXCMs first-ever Super Bowl advertisement to drive awareness of its Dexcom CGM technology among patients, and the recent coverage expansion of its Dexcom G6 CGM System, have attracted investors attention, as evidenced by the stocks 11.5% gain over the past month. Indeed, the stock has gained 20.7% year-to-date to close yesterdays trading session at $446.39. But while DXCM is a dominant player in the CGM market, it faces stiff competition from other key players that are making significant headway in the continuous glucose monitoring space. And, although the company reported better-than-expected first quarter results, the stocks stretched valuation could make investors nervous. Click here to checkout our Healthcare Sector Report for 2021  Here is what we think could influence DXCMs performance in the coming months:  Stiff Competition  With increasing demand for wearable continuous glucose monitoring devices and related tech-driven blood sugar reading systems, major players such as Medtronic PLC (MDT), Abbott Laboratories (ABT), and DXCM have been expanding into new markets to boost their sales prospects. However, increasing competition in the CGM market could be a major concern for DXCM. ABTs more affordable FreeStyle Libre portfolio and MDTs updated wearable continuous glucose monitoring product line could make it difficult for DXCM to grow its market share in the near term. Expanded Coverage of CGM System  Last month, DXCM announced that its diabetic patients, aged two years or older, that are going through intensive insulin therapy, would be eligible for provincial coverage of the Dexcom G6 CGM System through British Columbia PharmaCare. In addition, the provinces of Saskatchewan, Quebec and Yukon in Canada will be providing public coverage of its CGM systems under provincial health plans for people living with type 1 diabetes. As more people access DXCMs CGM technology, its market opportunity should increase significantly. Mixed Growth Potential  A $2.34 billion consensus revenue estimate for its fiscal year 2021 represents a 21.4% increase year-over-year. The companys revenue is expected to decrease 21.2% from the prior-year quarter to $2.83 billion next year. DXCM beat the consensus EPS estimates in three of the trailing four quarters. However, analysts expect its EPS to decline 27.1% year-over-year to $2.26 in the current year. They also expect it to decline 33% in the next quarter, ending in September 2021. Stretched Valuation  In terms of non-GAAP forward P/E, DXCM is currently trading at 194.74x, which is 701.9% lower than the 24.28x industry average. Its 99.99 and 19.96 respective forward EV/EBITDA and Price/Book ratios are significantly lower than the 16.31 and 4.49industry averages. DXCMs 146.53 forward Price/Cash Flow multiple is 683.4% lower than the 18.71 industry average. Consensus Price Target Indicates Potential Upside  Of the 20 Wall Street analysts that have provided ratings for the stock, eight rated it Buy and three rated it Hold. Currently trading at $446.39, analysts expect the stock to hit $475.7 in the near term, indicating a 6.6% potential upside. Their price targets range from a low of $380 to a high of $540. POWR Ratings Reflect Uncertainty  DXCM has an overall C rating, which translates to Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. Our proprietary rating system also evaluates each stock based on eight different categories. DXCM has a C grade for Growth. This is in sync with the stocks mixed growth prospects. In terms of Value Grade, DXCM has a C. The stocks higher-than industry P/E ratio is consistent with the value grade. Also, it has a C Stability grade, indicating higher volatility. In addition to the grades weve highlighted, one can check out additional DXCM ratings for Sentiment, Momentum, and Quality here. DXCM is ranked #107 of 185 stocks in the C-rated Medical  Devices & Equipment industry. Click here to view the top-rated stocks in the Medical  Devices & Equipment industry. Bottom Line  While rapidly expanding coverage and the initiative to drive better awareness of its G6 CGM System have been driving up DXCMs share price, the stocks upside could be limited given the competitive pressure from other major players in the market. So, we think investors should wait for the company to show further strength before investing in the stock. Click here to checkout our Healthcare Sector Report for 2021  DXCM shares were unchanged in premarket trading Wednesday. Year-to-date, DXCM has gained 20.74%, versus a 17.62% rise in the benchmark S&P 500 index during the same period. About the Author: Imon Ghosh  Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More... The postappeared first on