DexCom (NASDAQ:DXCM stock has dropped nearly 20% this month following FDA warning letters about manufacturing issues at its San Diego and Mesa facilities. The FDA cited concerns with processes and quality control. However, Dexcom maintains its 2025 financial outlook remains unchanged.
Now that DXCM stock has seen a large decline, it looks attractive but volatile – making it a tricky pick to buy at its current price of around $71. We believe there is minimal cause for concern with DXCM stock, which makes it attractive but highly sensitive to adverse events as its current valuation is extremely high.
We arrive at our conclusion by comparing the current valuation of DXCM stock with its operating performance over the recent years as well as its current and historical financial condition. Our analysis of DexCom along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a very strong operating performance and financial condition, as detailed below. That said, if you seek upside with lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.
How does DexCom’s valuation look vs. the S&P 500?
Going by what you pay per dollar of sales or profit, DXCM stock looks very expensive compared to the broader market.
• DexCom has a price-to-sales (P/S) ratio of 8.6 vs. a figure of 3.2 for the S&P 500
• Additionally, the company’s price-to-operating income (P/EBIT) ratio is 57.5 compared to 24.3 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 34.9 vs. the benchmark’s 24.3
How have DexCom’s revenues grown over recent years?
DexCom’s Revenues have seen notable growth over recent years.
• DexCom has seen its top line grow at an average rate of 18.2% over the last 3 years (vs. increase of 6.3% for S&P 500)
• Its revenues have grown 11.3% from $3.6 Bil to $4.0 Bil in the last 12 months (vs. growth of 5.2% for S&P 500)
• Also, its quarterly revenues grew 7.6% to $1.1 Bil in the most recent quarter from $1.0 Bil a year ago (vs. 5.0% improvement for S&P 500)
How profitable is DexCom?
DexCom’s profit margins are higher than most companies in the Trefis coverage universe.
• DexCom’s Operating Income over the last four quarters was $600 Mil, which represents a moderate Operating Margin of 14.9% (vs. 13.0% for S&P 500)
• DexCom’s Operating Cash Flow (OCF) over this period was $990 Mil, pointing to a high OCF-to-Sales Ratio of 24.5% (vs. 15.7% for S&P 500)
Does DexCom look financially stable?
DexCom’s balance sheet looks very strong.
• DexCom’s Debt figure was $2.6 Bil at the end of the most recent quarter, while its market capitalization is $28 Bil (as of 3/18/2025). This implies a strong Debt-to-Equity Ratio of 7.5% (vs. 19.0% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $2.6 Bil of the $6.5 Bil in Total Assets for DexCom. This yields a very strong Cash-to-Assets Ratio of 39.8% (vs. 14.8% for S&P 500)
How resilient is DXCM stock during a downturn?
DXCM stock has seen an impact that was slightly better than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on DXCM stock? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
• DXCM stock fell 48.8% from a high of $132.89 on 3 April 2022 to $67.99 on 16 June 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 12 July 2023
• Since then, the stock has increased to a high of $140.45 on 9 April 2024 and currently trades at around $71
Covid Pandemic (2020)
• DXCM stock fell 36.8% from a high of $75.63 on 20 February 2020 to $47.79 on 18 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 16 April 2020
Global Financial Crisis (2008)
• DXCM stock fell 87.0% from a high of $2.67 on 9 October 2007 to $0.35 on 20 November 2008, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 23 March 2010
Putting all the pieces together: What it means for DXCM stock
In summary, DexCom’s performance across the parameters detailed above are as follows:
• Growth: Very Strong
• Profitability: Strong
• Financial Stability: Extremely Strong
• Downturn Resilience: Neutral
• Overall: Very Strong
Hence, despite its extremely high valuation, the stock appears attractive but volatile, which supports our conclusion that DXCM is a tricky stock to buy.
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