Ready to buy the dip? This healthcare stock is a smart buy
This bear market may not really make you want to invest. But now is actually a great time to buy stocks from solid companies. Why? Because many are trading at a discount. Yet their long-term prospects remain bright.
It’s the case for DexCom (DXCM -2.81%). The company specializes in Continuous Glucose Monitoring (CGM) systems. The business is doing well today and should continue to grow. Meanwhile, DexCom shares have fallen 25% this year. So if you’re ready to buy the dip, this stock is worth considering. Let’s take a closer look at why you might want to add DexCom to your portfolio.
Three systems for monitoring blood sugar
DexCom sells the G6, G7, and DexCom One CGM systems to patients with diabetes so they can monitor their blood glucose levels. These systems are effective because a sensor implanted just under the skin constantly monitors the levels. And they’re easy for users because, unlike finger tests, they don’t involve pricking a person’s finger with a needle.
The G6 and G7 offer a full suite of features such as sharing readings with others, for example, a family member or friend. The DexCom One is a simpler and cheaper option for those who don’t need all the features offered by the G6 and G7. This allows DexCom to reach a wide range of people with diabetes, as well as others who need to monitor their blood sugar.
DexCom’s G6 is available in the US And the company aims to launch the updated G7 – already available in several other countries – in the US in the first quarter of next year. As for DexCom One, the company recently rolled out the product in the UK and Spain. And DexCom partnered with a big pharma company rock to distribute the DexCom One in Italy.
Over time, DexCom has demonstrated its ability to generally increase revenue and free cash flow. And the share price followed.
resources to grow
Today, as the company launches the G7 and DexCom One in different countries, it has the resources to grow. DexCom reported $2.75 billion in cash and cash equivalents in the second quarter. And he didn’t draw on his revolving credit facility.
For the full year, DexCom forecasts revenue in the range of $2.86 billion to $2.91 billion. This represents year-over-year growth of 17% to 19%.
Here’s why I’m optimistic that DexCom can achieve this growth and more over time. First, things are looking good when it comes to attracting users. In the second quarter, DexCom reached a record number of new quarterly customers.
And in the first 60 days of DexCom One sales in Bulgaria, Estonia, Latvia and Lithuania, more than 1% of the insulin-intensive population paid out of pocket for access to the product. Since then, these countries have each implemented partial or total reimbursement for type 1 diabetes.
At the same time, diabetes is a growing problem around the world. About 537 million adults live with diabetes. And that number is expected to reach 643 million by 2030.
Room for more than one success story
DexCom’s big competitor is Abbott Laboratories. This company manufactures the popular Freestyle Libre CGM system. But it’s just one product in Abbott’s diverse portfolio of medical devices and other businesses. DexCom could maintain its strength in the market thanks to its specialization in CGM systems. More than one company can win in this market.
DexCom shares slipped just a little more than the S&P500 Index this year. I don’t see this decline as a reflection of the company’s outlook. Instead, the stock appears to have followed the general market movement.
The stock may not rebound overnight. But the company has what it takes to boost stock performance over time. I’m thinking of growth opportunities for DexCom just ahead and further into the future. So it might be a very good idea to buy this innovative player right now – down.