Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of DexCom (NASDAQ:DXCM), a developer of continuous glucose monitoring systems, tumbled as much as 14% after reporting its first-quarter earnings results after the closing bell last night. Shares have since recovered nearly all of their losses and are trading around the flat line as of this writing.
So what: For the quarter, DexCom reported robust product revenue growth of 68% to $46.7 million as total revenue jumped to $47.1 million, a 59% increase from the prior year period. Despite its revenue growth, net loss widened to $12.5 million, or $0.17 per share, from $11.1 million or $0.16 during this quarter last year. By comparison, Wall Street was anticipating just $44.1 million in sales, but a narrower loss of $0.11 per share. The primary culprit was a 54% increase in total operating expenses tied to the launch of new monitoring systems and higher research and development costs.
Now what: DexCom continues to look like a winner on paper with close to 26 million people in this country having diabetes. Logically, any company that offers glucose monitoring devices should be a long-term success story. While we've witnessed DexCom's revenue soar in recent years, I'm personally still waiting for its bottom line to catch up with its monstrous share-price appreciation. With losses ongoing and the company valued at more than 100 times next year's profit projections, I'd suggest investors stick to the sidelines and wait for DexCom's valuation to dip considerably, or its profits to soar, before even attempting to dip their toes in the water.
DexCom shares have soared in recent years, but even it could struggle to keep pace with this top stock over the long run
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Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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