DexCom Inc (DXCM)

Conclusion

DexCom designs and sells continuous glucose monitoring systems for diabetes and metabolic health, including the Dexcom G7, Stelo and Dexcom Share. The stock closed at 81.07 USD on 9 November 2026, giving a market capitalisation of 30.2 billion USD.

The verdict is undervalued. The price-to-earnings ratio of 30.5 compares with a historical median of 99.8, and the enterprise value to EBITDA of 19.2 with a median of 80.5. The fair value band runs from 131.94 to 197.91 USD with a midpoint of 164.92 USD, a margin of safety of 103.4% at the current price. The discounted cash flow gives 64.57 USD per share, below the price, and the fair value from historical multiples is 265.28 USD. The price implies revenue growth of 18.4% a year, against 19.3% actually delivered over five years.

What holds the case up is net cash of 0.27x EBITDA (net debt to EBITDA of -0.2741), a return on invested capital of 46.5% against a weighted cost of capital of 11.7%, and free cash flow conversion of 110.8% over the last twelve months. What would break it is the discounted cash flow value of 64.57 USD, which sits well under the price, the gross margin of 63.4% against a median of 64.5%, and a share count that has risen 0.8% a year over five years.

Financial health

Financial strength is green: the current ratio of 1.74, the quick ratio of 1.33, net debt to EBITDA of -0.27 and interest coverage of 95.2 all pass, while debt to equity is 0.55. The Altman Z-score is 7.42, in the safe zone; the model was designed for manufacturing companies, and DexCom makes its own devices, so it applies reasonably well. Insolvency risk: low, about 0.3% by the estimate of the Ohlson model over one to two years, based on 2025 year-end figures. The company does not report a debt maturity schedule, so near-term refinancing needs cannot be checked from this data.

Earnings quality

Earnings quality is green: free cash flow conversion is 110.8% over the last twelve months and 102.6% over five years, and the accrual ratio is -9.4%, which points to cash-backed earnings. Stock-based compensation is 3.0% of revenue, and free cash flow after it is 944.2 million USD. The share count has grown at 0.8% a year over five years, a small dilution rather than buybacks. The Piotroski score is 7 of 9 and the Beneish M-score is -2.75, reading as unlikely to indicate manipulation. Six of the last eight quarters beat estimates, with an average surprise of 6.5%. Current-year estimates rose 1.3% over 90 days, but next-year estimates rose only 0.2%, with 8 upgrades against 5 downgrades in 30 days.

Profitability

Profitability is green. The operating margin is 24.0% against a ten-year median of 12.2%, and the net margin is 19.4% against 10.3%. The gross margin of 63.4% is slightly below its median of 64.5%, which is the weaker of the three. Return on invested capital is 46.5% against a weighted cost of capital of 11.7%, and the given spread of 34.7% confirms that it creates value; the five-year median return on invested capital is 26.5%. Return on equity is 39.1%, and the DuPont split shows a net margin of 17.9%, asset turnover of 0.74 and an equity multiplier of 2.31, so part of the equity return comes from leverage, though the balance sheet remains net cash.

Growth

Growth is green. Revenue has compounded at 17.0% over three years, 19.3% over five and 27.8% over ten, and it grew in all 10 of 10 comparable years. Earnings per share compounded at 37.2% over three years but only 10.3% over five. Free cash flow per share compounded at 55.0% over three years, 30.2% over five and 49.0% over ten. The analysts' consensus expects earnings growth of 16.1% next year, which is below the recent three-year pace.

Valuation

Valuation is green. The price-to-earnings ratio is 30.5 against a historical median of 99.8, a given discount of 69.4%, and the price-to-free-cash-flow ratio of 27.5 sits 83.0% below its median of 161.8. The discounted cash flow gives 64.57 USD per share, using a discount rate of 12.1%, a five-year growth rate of 19.3% and a terminal growth rate of 2.5%; the terminal value accounts for 49.9% of it, so the result does not rest mainly on the terminal value. The fair value band of 131.94 to 197.91 USD is an order-of-magnitude estimate built on fixed assumptions, including a 5% equity risk premium and capped growth, not a price target. The reverse discounted cash flow implies growth of 18.4%. The company pays no dividend. The currency is US dollars, so the free cash flow is not affected by the interest treatment that applies under IFRS.

Risks

The main risk is that the discounted cash flow value of 64.57 USD sits well below the current price of 81.07 USD, so the valuation verdict depends heavily on the fair value band, which is built on assumptions rather than observed prices. If growth slows toward the 16.1% expected for next year, the implied growth of 18.4% would be harder to deliver. A gross margin of 63.4%, below its median of 64.5%, would weaken the operating margin if pricing or product mix worsened further. Continued share issuance of 0.8% a year would dilute holders. The weak estimate revisions for next year could weigh on the stock if they do not improve. The analysis cannot see the debt maturity schedule, the revenue split by segment or the competitive landscape, and it does not include events after the dates of the underlying data.