The market has tested the patience of even the most seasoned of investors over the last year, and you're not alone if you've seen your portfolio struggle against the ongoing volatility. With even the most tried-and-true companies across a wide selection of industries seeing share prices buckle in this environment, it's more important than ever to consider where you put your investing capital to work and ensure that the underlying businesses align with your portfolio goals and risk tolerance.
If you're on the hunt for two compelling businesses to add to your buy basket this month, here are two names to consider right now.
1. DexCom
DexCom (DXCM 0.51%) continues to derive substantial revenue growth and profits from its market-leading portfolio of continuous glucose monitoring (CGM) devices. The company's latest launch of its newest generation of its flagship CGM device, the G7, is underway in the U.S. and was already launched in other key international markets before the end of 2022 in Europe, Asia, and beyond.
The G7 is approved in the U.S. for all diabetics from the age of two and up, and not only is it the most covered and reimbursed brand on the market, but the CGM itself has the fastest warmup time of any such device that is currently commercialized. The G7 is also 60% smaller than the prior version, the G6, making it easier to use and far more portable than its predecessor. While the company was only in the initial phase of its U.S. launch at the time of the 2022 earnings call, DexCom CEO Kevin Sayer noted:
We are hearing consistent praise for the new features, such as the 60% smaller form factor, shorter warm-up period, and more engaging and consumer-friendly app. Perhaps the most encouraging is that 97% of initial users surveyed have found G7 easy to use. We designed this product to simplify the lives of our customers, and we are thrilled to see that emphasis resonating.
Bear in mind, the G7 sensor can be worn for a maximum of 10 days. These devices can be lifesaving and are used by both type 1 and type 2 diabetics, although there remains a massive addressable market for each that is broadly untapped. About 1.7 million people were using DexCom's devices as of the end of 2022, while nearly half a billion people globally have diabetes. Currently, only about 3% to 4% of individuals with type 2 diabetes in the U.S. alone wear a CGM.
In short, not only is this a recurring revenue business, but one that enjoys a large and growing market opportunity. DexCom's revenue soared 19% in 2022, while profits jumped nearly 60%. For investors looking for a growth-oriented healthcare stock with a highly non-cyclical business -- and a profitable one to boot -- DexCom looks like a worthy contender for a multi-year buy-and-hold position.
2. Chewy
Chewy (CHWY 0.35%) continues to carve out a prolonged runway to growth for itself in the lucrative pet care industry, a space that hit a valuation upwards of $280 billion globally as of 2022. There are a variety of factors driving the growth of this space, from the rise of pet ownership to the reality that consumers are not only spending more on products but on quality products for their pets. For Chewy, an online retailer with its fingers in everything from pet healthcare to pet food, pet insurance, pet supplements, pet toys, and supplies, to name just a few segments within this vast addressable market opportunity, this creates a compelling road to growth ahead.
Even as consumers may be spending less on certain items in an environment that could be teetering on the brink of a recession, people are still going to spend money on their pets. Chewy's recent financial results certainly bear this concept out. And, the company is boosting its competitive edge with a growing network of automated fulfillment centers that not only slash its overhead costs but streamline the order processing and delivery timeline for customers.
In 2022, Chewy reported revenue of $10 billion, while net income came in at $49 million. The company is making more and more of its revenue and profits from its subscription program, Autoship. In fact, 73% of net sales came from its Autoship program in 2022. On the whole, Autoship sales came to $7.4 billion for the 12-month period, up 18% from 2021. And, as of the final quarter of the year, net sales per active customer hit $500, a roughly 15% surge compared to the fourth quarter of 2021.
Notably, Chewy generated $119 million in free cash flow in 2022, ending the year with about $677 million in cash and investments on its balance sheet. Even if consumers reel in spending in the near term given the current state of the economy, the overall trajectory of pet spending and the pet care industry on the whole bode particularly well for Chewy given the diversity of its business segments and the many different targets of pet spending its business taps into.
The fact that the company is also exposed to so many sources of pet spending means that the more non-cyclical sources of revenue can balance out these more cyclical areas. For investors, that could create a worthwhile buy-and-hold opportunity in the current market and well beyond.
