Glucose monitor maker DexCom (NASDAQ:DXCM) has had a rough month. After a Wall Street analyst downgraded the stock Oct. 2 and sharply trimmed its price target, the price fell over the next 30 days, with the majority of the downward movement taking place in the last week of October. For a company that hit its all-time high in early July, this contraction might only be the start of a larger price correction, but few seem to be taking notice.

While it's true that the market has been highly volatile recently, DexCom's stock is an unlikely candidate for a quiet collapse. The company's latest earnings report was overwhelmingly favorable. Its recent history is one of gaining traction, rising revenue, and successful iteration on its primary product. And it routinely beats the consensus earnings estimates produced by Wall Street analysts. So if its price continues to drop, it could be a good choice for your portfolio. Let's examine the company's trajectory to understand why.

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Continuous glucose monitors aren't exciting, but they make a big difference for patients

DexCom produces wearable continuous glucose monitoring (CGM) devices that help patients with diabetes maintain a healthy amount of glucose in their blood. This is a critical task, as deviations from a patient's ideal glucose range can cause kidney failure, fainting, or even death. DexCom's products are compatible with other life-preserving components, like insulin pumps, so patients can use the data from their monitoring sensor to stabilize their blood glucose levels appropriately. Without a wearable continuous glucose monitor, patients typically need to prick their fingers to extract drops of blood for use in a traditional glucose monitor multiple times per day.

DexCom isn't the only company to make CGMs, nor are CGMs a brand-new invention. In fact, nearly 40% of people with type 1 diabetes in the U.S. use a CGM. Nonetheless, DexCom has experienced significant demand for its products, and it recently doubled its manufacturing capacity for its G6 CGMs. In the third quarter, the company reported year-over-year quarterly revenue growth of 26.4%, smashing Wall Street's predictions

It's important to note that DexCom's third-quarter revenue growth was substantially less than what its investors are used to. Last year, quarterly revenue growth in excess of 44% was common. So, part of the stock's slide might stem from the appearance of decelerating growth. But decelerating growth doesn't make headlines if the underlying revenue expansion is still going strong -- like in DexCom's case.

DXCM Chart

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This stock deserves more buzz

DexCom is worth discussing because its competitive position is consolidating and strengthening. DexCom's gross profit margin of 68% is higher than it has been in recent history, as is its revenue. This is a sign that its newly launched G6 monitor is being produced and sold at an acceptable cost. In the future, the company will launch a successor, the G7, so operating sustainably in the meantime is a big plus.

The company's leadership also recently adjusted its revenue and profitability guidance. DexCom expects that its revenue, gross margin, and operating margin will all increase slightly more in 2020 than it initially expected. Amid the unpredictable economic impact of the pandemic, adjusting these estimates upward is a highly positive sign.

This year, DexCom's stock has increased in value by more than 42%. If everything goes according to plan, the company will continue to advance in the clinical trial process and increase its production capacity for the G7. While it's true that the company will face competition from other CGM manufacturers, at present there's plenty of space in the market, and the market itself is still growing. Thus, investors should look for DexCom to create new products that incentivize customers to stick with its platform rather than escaping to competitors.

DexCom is a highly promising company that appears to have fallen victim to Wall Street's treadmill of expectations. Even if nobody is discussing the stock's gains or losses, investors should still keep an eye on it for the next few months. If DexCom's revenues continue to shrink in its next earnings report, curbing expectations for its future growth might be appropriate. On the other hand, there's a good chance that the company's favorable self-appraisal is entirely warranted.

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.