The best healthcare stocks can lend sustainable returns and stable growth to investors' portfolios for many years, and large-cap company Dexcom (DXCM 1.88%) is no exception.

In this segment of Backstage Pass, recorded on Sept. 20, Fool contributors Brian Withers, Rachel Warren, and Toby Bordelon discuss why the company is such an attractive investment despite its high valuation. 

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Brian Withers: Rachel, we got another healthcare stock that I bet a lot of folks know, Dexcom. Tell us about that one.

Rachel Warren: I think Dexcom, it's another company that I've written about quite a lot. It's one I found really interesting because I think it has a very unique competitive advantage. It's one of the leaders in the continuous glucose monitoring device market. Primarily used by individuals with type 1 diabetes. So it fills this very important need for a huge population of healthcare consumers.

And so, the demand it faces is really very consistent no matter what's happening with the market or the economy. It's interesting because it has one product which is its current generation of its CGM device. It's called the G6 system. It's currently working on an upgrade to that, the G7 system, which is supposed to be, I think a lot smaller, have a longer wear time. But the market in which it operates, so continuous glucose monitoring devices, that market is supposed to grow at a compound annual growth rate of 10% in the 2020-2028 period, which is pretty impressive when you consider that Dexcom is one of the key presences within that market.

I know several years ago it had a market share hovering around 50%, I haven't seen a recent data since then. But another interesting thing to bear in mind, in the U.S. alone, about 1.6 million individuals that have type 1 diabetes, but only one in four of the potential individuals who might qualify for, you know insulin-requiring diabetes, actually use these devices. There's a huge untapped portion of the market as of yet, that Dexcom can reach in the coming years.

The stock is one of those, another multi-bagger, I believe it's up about 500% over the last five years. [laughs] It has definitely seen a lot of gains and it continually reports really high revenue increases as well, year-over-year and quarter after quarter. It's one of those that you can depend on for consistent growth and a clear competitive advantage, which are two big things to look for when investing in healthcare stocks.

Toby Bordelon: Yes. This is the company, again, I don't personally own myself, but I've thought about it a lot already. It's come up, I think, Brian, in a couple of things we've done with Brian Feroldi.

Brian Withers: Yeah.

Toby Bordelon: Some of the three-minute stocks or whatever. This has been there a lot. I've been thinking about it. One concern I have is that, man, what is my concern Brian, it looks expensive. [laughs] I know I keep coming back to that, but this one, you said it's up 500% from where it was five years ago.

Brian Withers: Yeah, it's got a price-to-sales ratio higher than Zoom.

Toby Bordelon: Yeah. I remember [laughs] even Brian Feroldi who loves this company agree that, yeah, a little bit pricey. So, my question for you, as a share-owner, does that concern you at all? If I'm a new investor coming in, let's say I don't own any shares, if I'm a new investor coming in, can I still jump in this company right now and expect to see some growth down the line? Or is it just one of those things where you shouldn't touch it right now?

Rachel Warren: I think so. I mean, I hope so [laughs] as I'm invested in it. No, I do really believe that it has a lot of room left to grow. For some of the reasons I had mentioned, it's in this very robust market space, that still has a lot of untapped growth potential. And although past performance is not an indicator of future performance, it has historically led to these really consistent share price gains. I do think it definitely can continue in that direction.

I personally believe that it will. But that's also something kind of great about fractional investing, is if you look at a stock like this and say, wow this is a lot for a healthcare stock, you know, it's OK to just put whatever amount one is comfortable with in that stock and then see how it performs, and then maybe add more to it later depending on what you're comfortable with. But, I do personally think it can definitely continue to grow even though it's have this massive gains.

Toby Bordelon: Cool. Well maybe I'll have to give it even more thought. I'm still on the fence on this one. But again, what they're doing, it's cool. I like the technology no questions about that. You cannot really criticize the product they got out there on the market.