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Why Soaring Health Industry Stock DexCom is a Strong Buy Right Now

Benjamin Rains

DexCom, Inc. DXCM shares have soared 45% since March 18, to crush its Medical Products industry’s 5% average climb. The connected glucose monitoring systems firm is also expected to continue to grow its top and bottom lines and DXCM stock might be somewhat immune to the current coronavirus economic uncertainty.

DexCom Basics

DexCom makes continuous glucose monitoring systems designed for people with diabetes. The San Diego, California-based firm allows people with diabetes the chance to place a small sensor just beneath their skin—most often on their abdomens or arms—to help them continuously monitor their glucose levels through a companion device, or via an app on compatible smartphones, smartwatches and other devices—this includes an array of offerings from Apple AAPL, Google GOOGL, Samsung, and more.

The systems have become widely popular because they don’t require people to prick themselves throughout the day in order to measure their blood sugar levels. DexCom’s internet-connected, data-sharing devices are also helpful because they enable family, friends, and healthcare providers to receive readings remotely in order to help the wearer make the proper decisions, such as ingesting sugar or taking insulin.

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Diabetes is also fairly common in the U.S. The Centers for Disease Control and Prevention said in its 2020 report that 34.2 million Americans, or just over 1 in 10, have diabetes and that 1 in 3 have “prediabetes.” Plus, diabetes is also the 7th leading cause of death in the U.S.

 

 

 

 

Outlook

DexCom crushed our Q4 fiscal 2019 earnings estimate in February ($1.15 vs. $0.75). Meanwhile, the firm’s full-year fiscal 2019 sales jumped 43% to come in at $1.48 billion, with U.S. revenue up 42% and international revenue up 48%. DXCM also said that it doubled its G6 sensor manufacturing capacity.

Peeking ahead, our Zacks estimates call for DexCom’s fiscal 2020 sales to surge over 20% to $1.78 billion, with 2021 expected to climb another 22% to $2.16 billion. These would mark the continuation of solid top-line expansion, with revenue up over 40% in 2019 and 2018, and compare favorably to 2017’s 25% growth.

At the bottom end of the income statement, DexCom’s adjusted FY20 EPS figure is projected to jump over 22% to $2.25 a share. Then the firm’s adjusted 2021 earnings are expected to climb 40% higher to $3.16 a share.

 

 

 

 

Bottom Line

The nearby chart helps investors see how much DexCom’s earnings estimates have climbed since it posted its Q4 results. This positivity helps DXCM earn a Zacks Rank #1 (Strong Buy) right now. DexCom also sports an “A” Grade for Growth and a “B” for Momentum in our Style Scores system.

DexCom is very much a growth play at this stage and investors might not want to take more than a nibble out of the stock at the moment, given the current coronavirus market conditions.

That said, the Dow and the S&P 500 climbed in four out of the last five trading days, which helps highlight why longer-term investors should try to remain at least somewhat exposed to the market even during rough times because you might miss out on big bounces if you don’t.

DexCom shares still have a bit more room to climb before they run into their highs, and the $2 trillion stimulus package and Fed’s moves should help provide a booster shot to the economy. And its industry rests in the top 16% of our more than 250 Zacks industries and includes fellow highly-ranked stocks such as Electromed, Inc. ELMD and Penumbra, Inc. PEN.

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