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DexCom (DXCM) Hits 52-Week High, Can the Run Continue?

Zacks Equity Research

Have you been paying attention to shares of DexCom (DXCM)? Shares have been on the move with the stock up 3.5% over the past month. The stock hit a new 52-week high of $161.3 in the previous session. DexCom has gained 23.8% since the start of the year compared to the 4% move for the Zacks Medical sector and the 14.1% return for the Zacks Medical - Instruments industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on July 31, 2019, DexCom reported EPS of $0.08 versus consensus estimate of $0 while it beat the consensus revenue estimate by 11.32%.

Valuation Metrics

DexCom may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

DexCom has a Value Score of F. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 171.4X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 237X versus its peer group's average of 22.6X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, DexCom currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if DexCom passes the test. Thus, it seems as though DexCom shares could have potential in the weeks and months to come.

How Does DexCom Stack Up to the Competition?

Shares of DexCom have been rising, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including Hologic (HOLX), Masimo (MASI), and SARTORIUS (SARTF), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

The Zacks Industry Rank is in the top 29% of all the industries we have in our universe, so it looks like there are some nice tailwinds for DexCom, even beyond its own solid fundamental situation.


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DexCom, Inc. (DXCM) : Free Stock Analysis Report
 
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