Dexcom Inc. (DXCM) designs and commercializes continuous glucose monitoring systems for diabetics. CGM systems serve as an alternative to the traditional blood glucose meter process, and the company is evolving its CGM systems to include the disposable sensor and the durable receiver.
The company recently reported a strong third quarter where both earnings and revenues beat expectations. This was driven by solid revenue from the Sensor segment. DXCM also saw revenue growth from both domestic and international sales. In fact, the company’s international foothold bodes well for future growth.
DXCM has a current ratio of 5.0, which indicates it has more than enough liquidity for short-term obligations. This has led to a Quality Grade of B in our POWR Ratings system. The company has also shown strong earnings and revenue growth.
Over the past three years sales have grown an average of 36.3% per year, while earnings jumped an average of 123.5% per year. However, the stock looks overvalued with a forward P/E of 172.41. DXCM has been showing bullish momentum since mid-May as shown in the chart below.
Take a look at the 1-year chart of DXCM with the added notations:
Chart of DXCM provided by TradingView
After rallying for 4 months, DXCM appears to be consolidating in a bullish flag pattern. The pattern gets its name from the appearance of a “flagpole” created during the steep, end of October jump, and then the formation of the current “flag” pennant (blue). This price action implies a break higher but is not a guarantee.
A break above the $650 resistance area should lead to higher prices. Thus a long trade could be made on a break above that level, with a protective stop order placed underneath the entry point.
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DXCM shares rose $5.91 (+0.91%) in premarket trading Monday. Year-to-date, DXCM has gained 74.88%, versus a 26.66% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp
I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing. More...
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