Diabetes is one of the most common diseases across the globe, and its prevalence is expected to rise due to the unchecked obesity epidemic. As a result, the demand for diabetes products has been going through the roof over the past decade, especially among next-generation medical devices.

Which diabetes-oriented healthcare companies are in the best position to benefit from this global trend? We asked three of our Motley Fool contributors this question, and they picked DexCom, Inc. (NASDAQ:DXCM)Insulet (NASDAQ:PODD), and Tandem Diabetes Care (NASDAQ:TNDM). Here's why these three medtech diabetes companies should be on your radar this month.    

Diabetes word on wooden letters with crystalized white sugar as frame.

Image source: Getty Images.

A medtech company with more room to run

George Budwell (DexCom, Inc.): Single-product companies with stocks that sport stately price-to-sales ratios over 12 are rarely compelling buys. However, the continuous glucose monitoring (CGM) device company DexCom is an oddball in this regard. Despite its over-the-top valuation and limited product portfolio, this diabetes medtech titan remains an attractive growth play, even at these elevated levels. 

What's the lowdown? DexCom launched its factory-calibrated G6 CGM device last year to rave reviews by end users. In fact, the company has barely been able to keep up with demand since launch, resulting in its first-quarter revenues growing by an astounding 52% to $280 million compared to the same period a year ago. And as the G6 launch matures, DexCom expects its gross margins to improve to a healthy 70%, perhaps by the end of 2019. The company, in turn, recently upped its annual revenue guidance by $75 million for the full year, thanks to the strong demand for the G6 system, in conjunction with its steadily improving profit margins. 

DexCom's growth story, however, is only getting started. The company expects to roll out its next CGM device, the G7, in late 2020 or early 2021. The G7 will feature a slimmer design, an entirely new sensor platform, and a far more customer-friendly price. The main goal with this next-generation CGM device is to greatly expand the market beyond type 1 or type 2 diabetes patients. DexCom envisions a day where individuals simply at risk of developing diabetes will be outfitted with one of their CGM devices. That's a lofty goal, but one that could exponentially growth DexCom's target market in the coming decade. 

Down (with) the tubes

Keith Speights (Insulet): Most diabetes patients don't have to wear insulin pumps. But for those who do, the long tubes associated with most insulin pumps on the market today can be a hassle. That's not the case for Insulet's OmniPod, though.

Insulet stock has already been a big winner so far in 2019. Shares soared after the company posted better-than-expected sales growth in its first-quarter results. Although Insulet doesn't announce its Q2 financial results until Aug. 5, 2019, don't be surprised if the stock runs up in advance of its next quarterly update.

The company thinks that year-over-year sales growth in the second quarter will be at least as high as the 29% growth delivered in Q1. Insulet CEO Shacey Petrovic predicts that the company is on track to achieve $1 billion in revenue in 2021 with a 70% gross margin and an operating margin in the midteens. To put that revenue figure in perspective, it's nearly double the total revenue that Insulet made in 2018.

A big reason for this optimism is the strong launch of the OmniPod DASH insulin management system in the U.S. Initial adopters of OmniPod DASH have praised its ease of use. And fewer prescribing restrictions have opened up access for more patients to use the insulin pump system.

Insulet looks really expensive if you look at earnings-based valuation metrics. But the company's earnings should grow rapidly. Insulet definitely appears to be a diabetes stock to keep your eyes on in July and beyond.

It could be a great time to buy this pump player, too

Todd Campbell (Tandem Diabetes): I agree with Keith that tubeless pumps offer advantages that make them desirable, but I'd also add that there's a good reason to cozy up to shares in the leading tubed-pump player, Tandem Diabetes.

Unlike Insulet, Tandem Diabetes' pump is FDA approved for use in tandem with DexCom's continuous glucose monitors to form a first-generation automated insulin dosing system. This system, which won the go-ahead last summer, disables the pump from dosing additional insulin when real-time data from the CGM shows dangerous blood sugar lows.

Since approval, demand for Tandem's pumps have taken off. In Q1 2019 the company shipped 14,732 pumps, up 75% from Q3 2018, and sales totaled $66 million, up 142% year over year. What's really remarkable about that performance is that the first quarter is typically weak because patients usually wait until later in the year, when their deductible is met, to buy equipment like this.

Since we're already in the second half of the year, I suspect more people meeting their deductibles will further accelerate pump shipments and revenue into the end of the year. Results could also benefit from the expected rollout later this year of next-generation software that will allow Tandem's system to make decisions based on high glucose readings, too. This additional feature will make Tandem's automated system much more helpful to many more patients.

Importantly, pump makers are only scratching the surface of the market. Only about 30% of the 1.5 million type 1 diabetics in the U.S. are using pump therapy currently, and Tandem's market share is only about 12%. Given that tailwinds may strengthen from here this year, buying this tubed-pump player this month could be profit-friendly.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.