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Here's Why You Should Add DexCom (DXCM) to Your Portfolio Now

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DexCom DXCM is progressing well on prudent acquisitions along with product portfolio expansion. Impressive contributions from its core segments and solid international expansion have also been key growth drivers.

This $24.09-billion leader in the field of design, development and commercialization of continuous glucose monitoring systems has an expected earnings growth rate of 36.7% for the next five years. Also, this Zacks Rank #2 (Buy) company has a trailing four-quarter positive earnings surprise of 128.3%, on average.

The stock has a Growth Score of A. Our research shows that stocks with a GrowthScore of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, are better picks than most. In the past six months, the stock has rallied 86.7% against the 10.2% decline of its industry. The stock also surged 141.4% against the S&P 500 index’s 11.8% decline.

Let’s delve deeper into the factors working in favor of the company.

Strong Product Portfolio: DexCom's FDA-cleared CGM system, the DexCom G4 Platinum, has been significantly boosting the top line. In January 2020, Tandem Diabetes launched its latest integrated pump offering viz. the Control-IQ system which  integrates the DexCom G6 sensor and its type zero algorithm to automated insulin delivery.

DexCom’s Insulet and Lilly diabetes management products continue to progress well. In December 2019, Insulet commenced the important trial, and thereby has been on track for a launch later in 2020. The company’s commercial agreement with Eli Lilly was officially signed last December and signifies another step toward bringing their system to the market with G6, which will initially focus on a smart pen offering.

Additionally, the company is well poised to achieve long-term target on the back of expansion of the G6 rollout and improved access to Continuos Glucose Monitoring (CGM)

Strategic Collaborations & Acquisitions: DexCom has been gaining from recent collaborative agreements. During the fourth quarter of 2019, DexCom’s collaborative work with UnitedHealthcare has displayed notable progress with the company being optimistic about CGM in its Type 2 population in 2020. The company looks forward to expanding the presence of CGM for type 2 customers through additional partnerships with programs offered by digital health players like Onduo, Livongo and WellDoc.

Solid Guidance: For 2020, DexCom anticipates revenues between $1.73 billion and $1.78 billion, indicating an improvement of 17-20% year over year. Per management, similar to the factors in 2019, this projected revenue growth is backed by expectations of increased volume growth owing to growing awareness and access of DexCom CGM.

Estimates Trend

The company is witnessing a positive estimate revision trend for 2020. Over the past 60 days, the Zacks Consensus Estimate for its earnings has risen 24.6% to $2.23 per share.

The Zacks Consensus Estimate for the company’s first-quarter 2020 revenues is pegged at $357.5 million, suggesting a 27.5% rise from the year-ago reported number.

Key Picks

Some othertop-ranked stocks from the broader medical space are ResMed Inc. RMD, AmerisourceBergen ABC and Integra LifeSciences Inc IART.

ResMed has a projected long-term earnings growth rate of 12%. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

AmerisourceBergen’s long-term earnings growth rate is estimated at 7.4%. The company presently carries a Zacks Rank #2.

Integra’s long-term earnings growth rate is estimated at 11.9%. It currently carries a Zacks Rank #2.

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