DexCom trades at $74.63 per share and has stayed right on track with the overall market, gaining 8.3% over the last six months. At the same time, the S&P 500 has returned 6.9%.
Is DXCM a buy right now? Find out in our full research report, it’s free.
Why Are We Positive on DXCM?
Founded in 1999 and receiving its first FDA approval in 2006, DexCom (NASDAQ: DXCM) develops and sells continuous glucose monitoring systems that allow people with diabetes to track their blood sugar levels without repeated finger pricks.
1. Core Business Firing on All Cylinders
We can better understand Patient Monitoring companies by analyzing their organic revenue. This metric gives visibility into DexCom’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, DexCom’s organic revenue averaged 12.5% year-on-year growth. This performance was impressive and shows it can expand quickly without relying on expensive (and risky) acquisitions. 
2. Increasing Free Cash Flow Margin Juices Financials
Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, DexCom’s margin expanded by 26 percentage points over the last five years. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. DexCom’s free cash flow margin for the trailing 12 months was 29.7%.
3. New Investments Bear Fruit as ROIC Jumps
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Over the last few years, DexCom’s ROIC has increased significantly. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.
Final Judgment
These are just a few reasons DexCom is a high-quality business worth owning, but at $74.63 per share (or 29.2× forward P/E), is now the right time to buy the stock? See for yourself in our in-depth research report, it’s free.
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