DexCom (NASDAQ:DXCM) advances 4.7% this week, taking five-year gains to 71%

Some DexCom, Inc. (NASDAQ:DXCM) shareholders are probably rather concerned to see the share price fall 43% over the last three months. But at least the stock is up over the last five years. However we are not very impressed because the share price is only up 71%, less than the market return of 105%.

Since it's been a strong week for DexCom shareholders, let's have a look at trend of the longer term fundamentals.

Check out our latest analysis for DexCom

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the last half decade, DexCom became profitable. That would generally be considered a positive, so we'd hope to see the share price to rise. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. In fact, the DexCom stock price is 42% lower in the last three years. During the same period, EPS grew by 4.5% each year. It would appear there's a real mismatch between the increasing EPS and the share price, which has declined -16% a year for three years.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that DexCom has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

A Different Perspective

DexCom shareholders are down 29% for the year, but the market itself is up 27%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 11%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 2 warning signs we've spotted with DexCom .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.