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Why DexCom Is Surging Today

By Brian Feroldi - Nov 7, 2019 at 11:21AM

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The medical device winner just keeps on winning.

What happened

After reporting blowout quarterly results, shares of DexCom ( DXCM -7.27% ), a diabetes company focused on continuous blood sugar tracking, jumped 29% as of 10:32 a.m. EST on Thursday.

So what

The headline numbers from the quarter were great:

  • Revenue soared 49% to $396 million. 
  • GAAP operating margin expanded by 890 basis points to 14% of revenue.
  • GAAP net income was $45.8 million, or $0.50 per share.
  • Non-GAAP net income almost quadrupled to $60.4 million, or $0.65 per share. That blew past the $0.20 that analysts had been expecting.
Money falling from sky buyout takeover riches

Image source: Getty Images.

Management also boosted its full-year guidance in response to the upbeat result:

  • Revenue is now expected to land between $1.425 billion and $1.450 billion. This represents growth of about 40% at the midpoint, which is much higher than its prior forecast of about 30% growth. It's also nicely above the $1.37 billion that Wall Street was looking for.
  • Gross profit margin is expected to be about 63%, down slightly from management's prior expectation of 64% to 65%.
  • Non-GAAP operating margin is expected to be about 9%, up from management's previous expectation of 7%.
  • Non-GAAP adjusted EBITDA margin is expected to be approximately 19.5%, up from management's prior forecast of 18.5%.

Traders are bidding up the share price in response to the nearly flawless quarterly report. 

Now what

These results should help to prove that DexCom isn't having any problems growing quickly even with increasing competition. What's more, the company is now solidly profitable, which is great to see.

DexCom's stock remains extremely expensive -- shares are trading for more than 14 times sales and 138 times next year's earnings estimates -- but that doesn't mean that this winner can't continue to win. 

If you're a growth stock investor, DexCom deserves a spot on your radar.

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.

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Stocks Mentioned

DexCom, Inc. Stock Quote
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DXCM
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