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Is DexCom's (NASDAQ:DXCM) 232% Share Price Increase Well Justified?

Simply Wall St

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While DexCom, Inc. (NASDAQ:DXCM) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 16% in the last quarter. But in stark contrast, the returns over the last half decade have impressed. Indeed, the share price is up an impressive 232% in that time. We think it's more important to dwell on the long term returns than the short term returns. Only time will tell if there is still too much optimism currently reflected in the share price.

Check out our latest analysis for DexCom

Because DexCom is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

For the last half decade, DexCom can boast revenue growth at a rate of 32% per year. Even measured against other revenue-focussed companies, that's a good result. Meanwhile, its share price performance certainly reflects the strong growth, given the share price grew at 27% per year, compound, during the period. This suggests the market has well and truly recognized the progress the business has made. DexCom seems like a high growth stock - so growth investors might want to add it to their watchlist.

You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).

NasdaqGS:DXCM Income Statement, May 31st 2019

DexCom is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think DexCom will earn in the future (free analyst consensus estimates)

A Different Perspective

It's good to see that DexCom has rewarded shareholders with a total shareholder return of 36% in the last twelve months. That gain is better than the annual TSR over five years, which is 27%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. If you would like to research DexCom in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.