Should You Buy DXCM Stock At $80?

DexCom (NASDAQ:DXCM) stock saw a notable increase of 16% on Friday following the announcement of its Q1 earnings and a share buyback program. The company’s first-quarter sales hit $1.04 billion, surpassing the anticipated $1.02 billion. However, its earnings per share (EPS) of $0.32 was slightly below the $0.33 consensus estimate. Furthermore, while DexCom reaffirmed its sales outlook for the full year, it adjusted its gross margin forecast downwards to 62%, a reduction from the previous range of 64-65%. Despite these mixed financial results, the main driver for the stock’s rise seems to be the company’s declaration of a $750 million share repurchase initiative.

After this recent quarterly performance and the resultant increase in stock price, an important question arises: is DXCM stock worth buying at its current price, which is above $80? We believe it is not advisable. We feel that DXCM currently appears overvalued.

This assessment stems from a comparative analysis of DXCM’s existing valuation relative to its recent operational results, as well as its current and historical financial condition. Our review of DexCom across key areas—Growth, Profitability, Financial Stability, and Downturn Resilience—highlights a company with strong operating results and a solid financial position, which are elaborated below.

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How Does DXCM Stock’s Valuation Compare To The S&P 500?

When considering what you pay per dollar of sales or profit, DXCM stock appears costly in comparison to the wider market.

• DexCom possesses a price-to-sales (P/S) ratio of 8.0, while the S&P 500’s figure stands at 2.8
• The company has a price-to-free cash flow (P/FCF) ratio of 28.1 compared to 17.6 for the S&P 500
• It holds a price-to-earnings (P/E) ratio of 60.9 versus the benchmark’s 24.5

How Have DexCom’s Revenues Grown In Recent Years?

DexCom’s Revenues have exhibited significant growth in recent years.

• DexCom’s revenue has expanded at an average rate of 18.2% over the last 3 years (compared to a 6.2% increase for the S&P 500)
• In the latest quarter, its quarterly revenues increased by 12% to $1.04 billion from $921 million a year earlier (versus a 4.9% growth for the S&P 500)

How Profitable Is DexCom?

DexCom’s profit margins are approximately at the median level for companies within the Trefis coverage universe.

• DexCom’s Operating Income for the last four quarters was $633 million, which reflects a moderate Operating Margin of 15.2% (compared to 13.1% for the S&P 500)
• DexCom’s Operating Cash Flow (OCF) for this period was $964 million, indicating a good OCF Margin of 23.2% (compared to 15.7% for the S&P 500)
• In the last four-quarter timeframe, DexCom’s Net Income stood at $535 million — reflecting a moderate Net Income Margin of 12.9% (in contrast to 11.3% for the S&P 500)

Does DexCom Appear Financially Stable?

DexCom’s balance sheet is very robust.

• At the end of the most recent quarter, DexCom’s Debt stood at $2.6 billion, while its market cap was $32 billion (as of 5/2/2025). This indicates a strong Debt-to-Equity Ratio of 9.3% (compared to 21.5% for the S&P 500). [Note: A lower Debt-to-Equity Ratio is preferred]
• Finally, Cash (including cash equivalents) accounts for $2.6 billion of the $6.5 billion in Total Assets for DexCom. This results in a very strong Cash-to-Assets Ratio of 39.8% (versus 15.0% for the S&P 500)

How Resilient Is DXCM Stock During A Market Downturn?

DXCM stock has demonstrated a decline greater than the benchmark S&P 500 index during some recent downturns. If you’re concerned about the effects of a market crash on DXCM stock, our dashboard How Low Can DexCom Stock Go In A Market Crash? provides a comprehensive analysis of how the stock behaved during and after previous market crashes.

Inflation Shock (2022)

• DXCM stock declined 58.2% from a peak of $162.81 on 17 November 2021 to $67.99 on 16 June 2022, compared to a peak-to-trough drop of 25.4% for the S&P 500
• The stock is still yet to recover to its pre-Crisis peak
• Its highest trading price since then was $140.45 on 9 April 2024, and it currently trades around $82

COVID-19 Pandemic (2020)

• DXCM stock dropped 36.8% from a high of $75.63 on 20 February 2020 to $47.79 on 18 March 2020, versus a peak-to-trough reduction of 33.9% for the S&P 500
• By 16 April 2020, the stock fully recovered to its pre-Crisis peak

Global Financial Crisis (2008)

• DXCM stock decreased 87.0% from a peak of $2.67 on 9 October 2007 to $0.35 on 20 November 2008, against a peak-to-trough dip of 56.8% for the S&P 500
• The stock entirely 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 outlined parameters is as follows:

• Growth: Very Strong
• Profitability: Neutral
• Financial Stability: Extremely Strong
• Downturn Resilience: Neutral
• Overall: Strong

In conclusion, while DexCom shows impressive performance across crucial operational and financial indicators, this strength seems to already be reflected in the company’s elevated stock valuation. Even though the proclaimed share buyback is a favorable element for the stock price, DexCom contends with fundamental risks. The growing adoption of GLP-1 drugs is expected to cause a contraction in the overall diabetes market in the years ahead, posing a significant challenge for DexCom. Moreover, the short-term pressure on the company’s margins adds to these worries. Therefore, we suggest that investors wait for a possible price dip before contemplating an investment in DXCM stock.

The high valuation of DXCM stock constrains its upside potential in the near to mid-term. As an alternative, the Trefis Reinforced Value (RV) Portfolio, which has surpassed its all-cap stock benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices), delivering strong returns for investors. Why is this? The quarterly rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks offered a flexible approach to capitalize on favorable market conditions while minimizing losses when markets decline, as detailed in RV Portfolio performance metrics.