Earnings season, which is fast approaching, is often somewhat volatile for the stock market. Companies that overdeliver or fail to deliver can see their share prices move significantly overnight.
However, long-term investors know that one quarterly report rarely changes the fundamental investment thesis of a corporation. It's nice to have money invested in excellent equities that should perform well no matter what happens in the next few weeks.
Let's consider two growth stocks that fit the bill: Eli Lilly (LLY +0.72%) and DexCom (DXCM 3.59%).
NYSE: LLY
Key Data Points
1. Eli Lilly
In 2023, pharmaceutical giant Eli Lilly grew its top line by 20% year over year to $34.1 billion despite sales of its coronavirus antibodies completely evaporating. The drugmaker should deliver similarly strong revenue growth this year. Eli Lilly's newly approved anti-obesity drug, Zepbound, is already so popular that many pharmacies can't keep up with the demand. Diabetes medicine Mounjaro (which is the same compound as Zepbound) will also continue performing well.
Investors should get used to these two brand names; they will be Eli Lilly's most significant growth drivers for years. The drugmaker has long been a leader in developing diabetes drugs. It markets other important products in this area, including Jardiance, whose sales are still moving in the right direction. Eli Lilly should earn key approvals in its core field of specialization in the next few years, including for a once-weekly insulin product it's working on called efsitora alfa.
Beyond diabetes and obesity, the company boasts an attractive lineup and pipeline. It includes immunology medicines such as Olumiant, Omvoh, and Taltz, and cancer therapies like Verzenio and Jaypirca. Eli Lilly has shown incredibly innovative abilities in the past five years and is now reaping the benefits. That's why it's crushed the market in recent years and should continue doing so for the foreseeable future.
Here's another excellent reason to invest in Eli Lilly: the company's solid dividend program. Though its forward yield of 0.68% isn't particularly attractive, Lilly has doubled its payouts in the past five years. So, whether for growth or dividends, Eli Lilly is an excellent stock to buy this month and hold onto for a long time.
NASDAQ: DXCM
Key Data Points
2. DexCom
DexCom develops continuous glucose monitoring (CGM) systems for diabetes patients. The company's current lineup includes the G6, the newer G7, and the DexCom One, a cheaper option marketed to more price-sensitive consumers. CGM devices beat out blood glucose meters (BGMs) since the former continuously track blood sugar levels throughout the day, making measurements as often as every five minutes. BGMs use painful finger sticks and are limited to telling blood sugar levels at a specific time.
That's why the adoption of CGM technology is rising. DexCom, one of the leaders in the field, continues to benefit from this trend. Last year, the company's revenue increased by 24% year over year to $3.62 billion. DexCom's earnings per share of $1.30 grew nearly 58.5% compared to 2022.
Although some investors worry that the rising popularity of anti-obesity medicines like Zepbound will mean less business for the company, DexCom still has plenty of room to grow. As management highlights, diabetes patients follow their doctors' advice to use CGM technology in conjunction with weight-loss therapies, so this shouldn't be the headwind that some expect. DexCom still estimates that the market in the U.S. is underpenetrated; meanwhile, thanks to third-party payers increasingly covering CGM worldwide, it's gained access to an additional 4 million reimbursed patients in the past two years.
And there's still a massive untapped market worldwide. There are now more than 500 million adults with diabetes, just about 1% of whom use CGM technology. Many of these patients reside in developing countries where DexCom doesn't yet do business. The company has made it a point to expand into new territories, though, and could eventually have a much broader footprint than it currently does. That's how DexCom could deliver outsized returns for years to come.
