Don't let DexCom's (DXCM +4.49%) drop of 38% this year fool you: This business is teeming with growth, and it's still fully capable of being a great long-term investment, especially starting this week. The medical device manufacturer will report its second-quarter earnings after the market closes on Thursday, July 28, and in doing so it'll provide a lot of new information that's likely to power movement in its stock.
In particular, the company's foray into international markets will be in sharp focus, and investors will get key updates about how quickly they should expect its presence to expand. If you're thinking about buying a few shares, take the next step and consider another pair of arguments for why it could be a wise decision.
NASDAQ: DXCM
Key Data Points
1. It'll be reporting on successes with its recent product launches
DexCom's wearable continuous glucose monitor (CGM) is its primary product, and it's always working to add more features and launch new devices that make life easier for people with diabetes. Last quarter, the company started to sell a limited number of units of its new CGM, the G7, and it also initiated the sale of its DexCom One system in Spain and the U.K. The One product combines its older G6 monitors with a new software suite, thereby helping customers track and control their blood glucose levels in real-time more effectively than they might otherwise.
When DexCom One was recently launched in Latvia, Lithuania, Estonia, and Bulgaria, it penetrated more than 1% of the addressable market in those countries within the first 60 days. That's especially impressive when considering that patients in those markets paid out of pocket for their systems. And if the business shows that it did an encore performance in the new markets it just launched in, it'll be a strong positive for the stock.
Likewise, if it reports that sales of its G7 monitors are hot right in the months after it launched in the U.S., it'll set the stage for an equally successful rollout in international markets down the line. If the new launches power its Q2 revenue to grow by more than 25% year over year, which is how rapidly the top line grew in Q1 when quarterly sales were $629 million, it'll be especially favorable.
2. Its international operations are leading to massive growth, and efforts to drive even more are probably on the way
The second reason DexCom might be a smart buy this week is closely related to the first. Thanks to its effective product and new launches, it's getting a significant amount of global traction. In its fiscal 2021, its revenue from markets outside of the U.S. grew by 44%, hitting $599.1 million. At the time, it only derived 24% of its total revenue from international markets, but after the first quarter of this year, those same markets are worth 28% of its quarterly intake.
In other words, its overall growth rate is becoming less dependent on success in the U.S., which is a positive sign because competition is likely to be the fiercest there. And there's a good chance the company is going to lean into its early successes internationally, just like it did domestically.
Management anticipates that its total addressable market outside of the U.S. will triple before the end of 2023. While it gains market share in developed markets in the E.U. and Asia, the next step will be to enter developing markets. Capturing growth might well require a scale-up of its sales organization; in the U.S. last year, it opted to double its sales force. Doing that for its ex-U.S. sales operations would ultimately imply a significant amount of additional selling, general, and administrative (SG&A) expenses, but it would also pave the way for more rapid market penetration and nearer-term gains for investors too.
Buying shares of DexCom before it explicitly announces another massive sales scale-up will ensure that investors get the full benefit of price appreciation in the aftermath, not to mention the benefit from any reporting of strong earnings.
