Bill Gunderson

About the Author Bill Gunderson

Bill Gunderson is the CEO and Chief Market Strategist of Gunderson Capital Managment in San Diego, CA. He is also a professional money manager, former research analyst, author of Best Stocks Now, and developer of the Best Stocks Now smartphone app. He offers four free weeks to his weekly Best Stocks Now to Seeking Alpha readers. He also hosts a daily stock market radio show on AM1000 KCEO from 7am-8am. Bill has appeared on the Fox Business Channel and on Bloomberg radio numerous times. He has been published in Barron's, Forbes, and numerous other publications i.e. Los Angeles Business Journal, San Diego Union Tribune, Phoenix Business Journal, Salem News, Rochester Business Journal, and many others.

DexCom Still A Favorite Diabetes Stock

DexCom (NASDAQ:DXCM) continues to be one of my favorite diabetes stocks. DexCom, founded in 1999 and based right here in my hometown of San Diego, California, is a medical device company that makes continuous glucose monitoring (CGM) systems.

According to Allied Market Research, the continuous glucose monitoring market is expected to grow to $568.5 million by 2020. CGM’s are far more accurate and less painful than the old fingerstick method. Other companies that make these devices include: Medtronic (NYSE:MDT), Johnson and Johnson (NYSE:JNJ) and Abbott (NYSE:ABT).

DexCom just reported Q3 earnings results on November 6th. Earnings were a couple of pennies light due to higher cost of sales and increased marketing expenses related to their new product launch. But investors were focused on the beat on revenues which came in at $67.9 million versus estimates of $61.06 million. The company also guided up FY14 revenues to meeting or exceeding the top end of the $235 million range.

But what investors are really excited about is that the company just receivedFDA approval for a new algorithm designed for its G4 Platinum Continuous Glucose Monitoring (CGM) System. They were so excited that the stock traded up more than 14% on the news.

The new Software 505 features the same advanced algorithm used in artificial pancreas research around the world. In effect, this latest software upgrade makes the devices performance level comparable to blood glucose finger stick monitoring. This painless and bloodless method of monitoring represents a significant improvement in the standard of care for diabetic patients, achieving an important milestone in accuracy. More than 29 million Americans suffer from Diabetes and it is the 7th leading cause of death in the U.S.

Demand for DexCom’s G4 system is robust, particularly in the area of pediatric sales DexCom’s CGM markets itself as “smart, sleek, simple, and continuous. Specifically, the company’s pediatric segment accounted for almost a third of new patient additions. DexCom’s CGM for children can be used on children as young as 2 years old.

The company’s new software algorithm will be made available free to existing G4 Platinum patients and will be preloaded on new units.

Best Stocks Now Analysis

Data from Best Stocks Now app

DexCom is a small cap medical device company with a market cap of $3.8 billion. Given its size and the fact the company is not yet profitable, its risk profile is Aggressive.

Data from Best Stocks Now app

Being as DexCom is still operating at a loss, valuation metrics are somewhat meaningless. The 5-year annual growth rate projected for the company is 32.5% however, highlighting the fact that DexCom is a growth stock, not a value stock. I am not to concerned about DexCom’s valuation given its positive growth outlook.

And DexCom shares have indeed grown! The stock has posted an average 3 year return of 90% and a 5-year return of 47%. It was up a whopping 161% last year in 2013. It receives a Momentum Grade of A.

Data from Best Stocks Now app

Currently DexCom ranks #70 in my 3900+ stock universe. I am long DexCom in my speculative trading account. It currently receives a Stock Grade of A and rates a Strong Buy.

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