Diabetes-focused medical device specialist DexCom (DXCM +3.44%) has been successful thanks to its continuous glucose monitoring (CGM) devices that allow diabetes patients to check their blood glucose levels in real time.
While the growing adoption of this technology has generally bolstered its revenue, the company's top-line growth rates have dropped of late. However, DexCom's stock still performed slightly better than the broader market over the past year as several developments helped put the wind in the company's sails.
How will the next 12 months go for DexCom? And is the stock a buy right now? Let's find out.
NASDAQ: DXCM
Key Data Points
The launch of its newest product will continue
DexCom's CGM systems work with a sensor inserted beneath the skin that measures blood glucose levels and sends signals and readings to a compatible device. The company hit an important milestone last year when it earned clearance for its newest device, the G7.
Compared to its previous iteration, the G6, the G7 has a sensor that is 60% smaller, a shorter warm-up period, and an app that is more user friendly. It has helped diabetes patients stay within their target glucose range longer and achieve better health outcomes in clinical trials.
DexCom started the launch of the G7 in Europe last year, but it was cleared in the U.S. only in December. Throughout the next year, DexCom should continue rolling out the G7 in Europe while also doing so in the U.S. The company's newest crown jewel should help the adoption of CGM technology increase along with DexCom's revenue.
DexCom has been aggressively marketing its devices, even partnering with several celebrities, including Nick Jonas, to do so. The company had its first-ever Super Bowl commercial earlier this year. DexCom ended 2022 with an installed base of 1.7 million customers, an increase of 35% year over year.
With its new G7 and aggressive marketing, the company should be able to easily get to 2 million customers within the next 12 months. And that's before considering its introduction of the DexCom ONE, a CGM device that targets price-sensitive customers in some regions.
For fiscal 2023, DexCom expects revenue in the range of $3.35 billion to $3.49 billion, which would result in a top-line growth rate between 15% and 20%. At the midpoint, that would come to slightly below the company's revenue gain of nearly 19% in 2022, continuing DexCom's recent trend of declining top line growth.
DXCM Revenue (Annual YoY Growth) data by YCharts
Meanwhile on the bottom line, DexCom has been profitable on an annual basis for the past three years. In 2022, the company's net income came in at $341.2 million, an increase of 57.3% year over year. While DexCom did not provide guidance, there is a good chance the healthcare company will remain in the green for fiscal 2023.
Looking beyond the next 12 months
DexCom still has massive growth potential left in the CGM market. Diabetes affects 37.3 million people in the U.S. alone and about 422 million worldwide. DexCom is one of the leaders in this space with its installed base of just 1.7 million. So in all likelihood, there are still tens of millions of patients to bring into the CGM ecosystem.
CGM devices are better than the typical way of measuring glucose, blood glucose meters, since the former don't require painful finger sticks and can make substantially more readings throughout the day -- up to 288, or up to once every five minutes. It isn't just a matter of convenience or avoiding pain, either. Having more information regarding how their blood glucose levels fluctuate throughout the day can allow diabetes patients to make better, more informed decisions about their health.
For that reason, CGM technology has been linked with superior outcomes for patients compared to those who use blood glucose meters. So even beyond the next year, during which DexCom should make solid progress within its large target market, the medical device company will still have plenty of growth potential. The opportunities ahead should also help DexCom's revenue growth stabilize and maintain a good pace for years.
That's why investors should strongly consider adding shares of DexCom to their portfolios right now and holding on to them for a long time.
