Dexcom Inc (NASDAQ:DXCM) Fits the Affordable Growth Strategy with Solid Expansion and Sensible Pricing

The Affordable Growth investment strategy works to find companies showing solid expansion possibilities while keeping sensible prices. This method looks for stocks with strong growth paths that are not too costly compared to their earnings possibilities, giving investors access to companies that mix expansion traits with basic steadiness. By concentrating on firms with good profitability and financial condition together with growth and sensible price measures, this approach tries to balance chance with risk control.

DEXCOM INC (NASDAQ:DXCM) functions as a medical device company focused on continuous glucose monitoring systems for diabetes management. The San Diego-based company has become a frontrunner in creating new biosensing technology, with products like the Dexcom G6, G7, and Stelo systems serving different patient groups across the diabetes range.

Growth Path

Dexcom shows notable growth traits that fit the Affordable Growth strategy's focus on expansion possibility. The company's past results and future outlook present a solid growth story:

• Revenue has increased at a notable 22.27% average each year over recent years, with the last year showing 9.30% growth
• Earnings Per Share has risen by 29.25% yearly on average across several years
• Future estimates predict EPS growth of 22.60% and revenue growth of 13.90% each year

While the last year showed a small EPS drop of 2.86%, the long-term growth trend stays strong. The company's place in the diabetes care market, especially with its over-the-counter Stelo system for type II diabetes patients not using insulin, offers several paths for continued growth in a rising global health market.

Price Evaluation

Dexcom's price presents an interesting view that backs the Affordable Growth framework's need for sensible cost. The company trades at what might first seem like high multiples, but the situation shows a more detailed image:

• Current P/E ratio of 38.31 sits higher than the S&P 500 average of 27.02
• Forward P/E of 24.78 matches more closely with the market average of 22.57
• Enterprise Value to EBITDA ratio places Dexcom as less expensive than 72.77% of industry peers
• Price/Free Cash Flow ratio is more appealing than 76.44% of similar companies

The PEG ratio, which includes growth expectations, suggests the current price might be acceptable given the company's expansion path. For growth-focused investors, paying a fair premium for companies with Dexcom's growth profile can represent a measured risk within an Affordable Growth method.

Profitability Quality

The company does very well in profitability measures, a key part for lasting growth investing. Dexcom's profitability score of 9/10 shows very good operational effectiveness:

• Return on Equity of 22.21% does better than 94.24% of industry rivals
• Return on Invested Capital of 14.52% also beats 94.24% of peers
• Profit margin of 13.29% ranks higher than 89.53% of the industry
• Operating margin of 17.22% exceeds 87.43% of similar companies

These solid profitability measures give assurance that the company's growth is supported by sound business basics rather than speculative expansion. The upward direction in both profit and operating margins further supports the quality of Dexcom's earnings growth.

Financial Condition Points

Dexcom's financial condition score of 5/10 presents a mixed view that deserves notice. The company shows several positive signs next to some areas of watchfulness:

• Altman-Z score of 4.93 shows low bankruptcy danger and does better than 79.58% of industry peers
• Debt to Equity ratio of 0.50 shows fair use of debt financing
• Current ratio of 1.52 and quick ratio of 1.35 indicate enough short-term cash availability
• The company has been raising its share count over recent years, which can lessen value for current shareholders

While the cash ratios are behind some industry rivals, the overall financial soundness picture stays acceptable for a growth company, especially given the solid profitability and cash flow creation that supports debt handling ability.

Investment Points

Dexcom stands as an interesting example in Affordable Growth investing, mixing solid expansion prospects with price measures that, while not very low, seem acceptable given the growth path and very good profitability. The company's position in the rising diabetes care market, combined with its technology leadership in continuous glucose monitoring, offers a base for continued growth.

The detailed fundamental analysis report gives more depth for investors doing further research. The company's profile fits the Affordable Growth strategy's main idea: finding companies where growth possibility is not completely shown in the current price, while keeping enough basic strength to reduce downside risk.

For investors looking for similar chances, more Affordable Growth options can be found using our focused screening tool that finds stocks meeting these specific requirements.

Disclaimer: This analysis is based on fundamental data and scores provided by ChartMill.com and shows an objective review of the company's financial measures. It does not form investment advice, suggestion, or support to buy or sell any security. Investors should do their own research and talk with financial advisors before making investment choices. Past results do not guarantee future outcomes, and all investments carry risk including possible loss of original funds.